Preamble

The House met at Half past Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

CITY OF LONDON (VARIOUS POWERS) BILL

Read the Third time, and passed.

BEDFORDSHIRE COUNTY COUNCIL (SUPERANNUATION) BILL (By Order)

Read a Second time, and committed.

Oral Answers to Questions — TRADE AND COMMERCE

Merchandise Marks Acts (Complaints)

Miss Burton: asked the President of the Board of Trade the result of his investigation into the allegations made against the Supreme Supply Company by the hon. Member for Coventry, South; and whether he has decided to initiate a prosecution under the Merchandise Marks Acts as the offences complained of took place after 1st February last.

The President of the Board of Trade (Mr. Peter Thorneycroft): I have had a pair of the advertised gauntlets purchased by one of my officers and examined by experts. They were found to comply substantially with the description in the advertisement. I am advised that this description was not false or misleading in any material respect, that there is no prima facie evidence of a breach of the Merchandise Marks Acts, and that there are no grounds for instituting proceedings.

Miss Burton: Is the right hon. Gentleman aware that the word in his reply which demands attention is "substantially"? Is he further aware that I have here a pair of gloves which I bought, and which certainly conflict in every way with

the advertisement? If I send these gloves to the President, will he have them examined to see whether or not they conform to the advertisement?

Mr. Thorneycroft: The word "substantially" appears not only in my answer but in the Act. The gloves which I have examined do not conflict with the Act. If the hon. Lady has another pair of gloves, perhaps she will institute proceedings.

Miss Burton: In evidence before you, Mr. Speaker—as the right hon. Gentleman has spent a lot of time writing letters to me—may I say that I have these gloves in my hand now, and that I shall give them to the right hon. Gentleman after Questions?

Miss Burton: asked the President of the Board of Trade whether he is aware that J. Radcliffe and Company, Limited, J. and S. Taylor, Limited, and J. J. L. and C. Peate (Guiseley) Limited, have been offering wool and camelhair cloth with a two per cent. content of camel-hair; that William Edleston, Limited, Job Beaumont and Sons, Limited, and Holywell Textile Mills, Limited, have also been offering one with a seven per cent. content of camelhair; and, as each of these six firms has also offered labels with the cloths concerned, if he will investigate the matter with a view to prosecution under the Merchandise Marks Acts.

Mr. P. Thorneycroft: My investigations have established that these cloths are manufactured to the specifications of customers. I am advised that in these circumstances there is not a satisfactory case for prosecuting the manufacturers, but I am investigating subsequent transactions.

Miss Burton: Is the right hon. Gentle man aware that I have been informed that he had sent his inspectors to investigate these matters and that, in anticipation of his refusal, I have here a specimen of the cloth? Will he tell the House why, when I brought this serious matter to his attention some time ago, he told me that I had not sent him sufficient detail to investigate further and yet, when I sent him half as much information as I gave him the first time, he has decided to take action?

Mr. Thorneycroft: The hon. Lady does not always send me the evidence when


she makes these charges. It would be helpful if she did. In this case, now that I have the facts, it is clear that no case would lie against the manufacturers, who are manufacturing these articles to customers' requirements, but I am investigating subsequent transactions, and it is possible that a case may lie there.

Mr. Speaker: Miss Burton. I am calling the hon. Lady to ask Question No. 3, and I shall be greatly obliged if she will contrive to compress her supplementary questions.

Sir T. Moore: On a point of order. I admit this is a conditional question, Sir, but if I were to ask a Question about nursery schools and their treatment of children should I have to bring along a child?

Mr. Speaker: Order. I have called Question No. 3.

Miss Burton: I am sorry if my supplementary question was lengthy, but I asked only one, Sir. On occasion, Mr. Speaker, you kindly allow two. May 1 therefore suggest, with great respect, that my supplementary question was not too long in the circumstances?

Mr. Speaker: We must pass on.

Mr. Anthony Greenwood: On a point of order. Is it not a little unfortunate that only the hon. Lady who asked the Question is allowed to put supplementary questions, and other hon. Members who have an interest in the matter are not allowed the same opportunity?

Mr. Speaker: When an hon. Member puts down a Question for answer in the House he should be allowed to pursue his own hare. It is not always proper for other hon. Members to join in.

Miss Burton: asked the President of the Board of Trade what steps he proposes to take with regard to the Masnaga bedspread, about which he has been informed, which was made in Italy by Giuseppe Rossini of Como; whether he is aware that this was imported into this country bearing a ticket marked 90 by 100 although in fact measuring only 84 by 91½ inches; that the bedspreads did not bear a label securely attached to each article showing the country of origin; and whether, as these are contraventions of the Merchandise Marks Acts, he will initiate a prosecution against the importers.

Mr. P. Thorneycroft: The hon. Member referred me for further information to an organisation known as the Retail Trading Standards Association, but it was unable to give any assistance in the matter. I did, however, obtain enough evidence from other enquiries to satisfy me that there were insufficient grounds for prosecution.

Miss Burton: I am sorry, but I must disagree with that information. The right hon. Gentleman has been misinformed by his advisers. [HON. MEMBERS: "Speech."] Is the right hon. Gentleman aware that when he asked me for further details, on 15th March, I referred him to the Retail Trading Standards Association, which has given him full details relating to these cases? Will he not, therefore, look into the matter, and withdraw his statement subsequently when he finds that I am right? May I have an answer?

Mr. Thorneycroft: I have nothing to add to the answer I have given.

Mr. H. Wilson: Since it would appear that in this case the requirements that would have had to be complied with when the Utility scheme was in existence were not complied with, and as there would have been a deterrent through Purchase Tax on these items, does not the right hon. Gentleman recognise that a great many of the difficulties being created at present are the result of his having got rid of the Utility scheme?

Mr. Thorneycroft: This has nothing to do with the Utility scheme.

Miss Burton: I beg to give notice that, as the replies to all three of my Questions have been very unsatisfactory, I shall raise the matter on the Adjournment.

Mr. Speaker: There will be more time then.

Mr. Swingler: asked the President of the Board of Trade if, in view of the present inadequacy of his Department to deal with complaints of infringements of the Merchandise Marks Acts, he will establish a new section of his Department for this purpose and to initiate prosecutions where necessary.

Mr. P. Thorneycroft: I do not accept the suggestion made in the first part of the Question. The second part does not, therefore, arise.

Mr. Swingler: Is the President aware that the suggestion in the first part of the Question arises directly from what he has himself stated in the House: that it would be intolerable if citizens complained to his Department about infringements of the Merchandise Marks Act and his Department could not cope with them? I am suggesting that the right hon. Gentleman should set up a new section in his Department which could cope with them. Will he give an assurance, therefore, that he welcomes citizens complaining about infringements of the Act and that his Department will take action and, therefore, save a good deal of time which is taken in raising questions in the House?

Mr. Thorneycroft: I cannot accept the hon. Member's interpretation of what I said on a previous occasion. I do not feel that the public interest is served by ever greater increases in the size of Government Departments.

Lieut.-Colonel Lipton: asked the President of the Board of Trade how many complaints he has received since 1st February last from members of the public about infringements of the Merchandise Marks Acts.

Mr. P. Thorneycroft: Ten, Sir.

Lieut.-Colonel Lipton: Is the President aware that the only people who will be satisfied with his pretence that, by and large, the enforcement of these Acts has little or nothing to do with him, will be the manufacturers and makers of shoddy goods which are falsely described to the public?

Mr. Thorneycroft: The Question asks how many complaints I have had, and the answer is that there have been 10. It has nothing to do with the activities of the Board of Trade.

Mr. Swingler: What action has been taken on the 10 complaints?

Mr. Thorneycroft: Six of the cases proved to be unsuitable for prosecution and four are still under consideration.

Mr. Gower: Generally speaking, are not shopkeepers who sell inferior goods likely to antagonise their customers, and are not makers of inferior goods likely to antagonise those who buy from them? Is this not the best corrective in the long run?

Mr. Thorneycroft: Yes, certainly. The very small number of cases in which there are breaches of the Merchandise Marks Acts must be weighed against the large number of cases in which British manufacturers and retailers sell good quality articles.

Japanese Goods

Mr. Ellis Smith: asked the President of the Board of Trade what further assurances he has received from the Japanese Government that the promises made when the Japanese peace treaty was ratified, regarding fair trading, improvements in workers' standards and other matters, are being fulfilled.

Mr. P. Thorneycroft: Japan has acceded to all the international conventions which she undertook to join at the signing of the Peace Treaty, including the Madrid Agreement for the prevention of false indication of origin of goods. The Japanese authorities have been co-operative in putting a stop to the copying of designs.

Mr. Smith: Does that mean that they have also carried out their undertaking about the development of trade unions? Are they allowing democracy and trade unions to develop in Japan, in the way we understand them?

Mr. Thorneycroft: Yes, I think they have now subscribed to the International Labour Organisation. They have joined all the organisations they undertook to join and signed the conventions they undertook to sign at the signing of the Peace Treaty.

Mr. Swingler: Since the signing of these conventions have there not been reports made by our Commercial Attache in Tokio of infringements of designs? What action has the right hon. Gentleman taken to draw the attention of the Japanese authorities to those cases?

Mr. Thorneycroft: There have been some reports, and I would urge any hon. Member, no matter in what quarter of the House he sits, who hears of a case that can be substantiated not by rumour but by solid evidence, to draw it to my attention.

Mr. H. Wilson: Is the right hon. Gentleman aware that one of the reasons why Manchester merchants, at any rate, are not reporting some cases to him is


that they have no confidence that he will follow them up adequately? Does he remember that when, through his good offices, a conference was convened in Manchester, the only proposal that came out of it was a proposal that merchants should send copies of all their registered designs to the Japanese so that they could look at them and ask traders not to copy them?

Mr. Thorneycroft: I am quite certain that merchants in Manchester, if they know of cases, will draw them to the attention of the Board of Trade.

Mr. Vane: asked the President of the Board of Trade what types of brooms and brushes are included in the permitted imports from Japan into this country and the Colonial Empire under the sterling payments agreement of 29th January, 1954; and by how much he estimates the needs of this country cannot be met by the production from existing home industries.

Mr. P. Thorneycroft: All types of brooms, and brushes, other than those containing precious metal, can be imported into the United Kingdom within the recently established quota for Japan. The Trade and Payments Agreement contained no special provisions for imports of brooms and brushes into the Colonies.
As regards the second part of the Question, the United Kingdom exports many more brooms and brushes than she imports.

Mr. Vane: Why is it necessary to import brooms and brushes if our home industry is capable of supplying our own needs and more?

Mr. Thorneycroft: We could not carry on very long as a trading nation if we adopted that commercial principle. We export many more than we import.

Imported Products (Marking)

Mr. Ellis Smith: asked the President of the Board of Trade whether, on imported articles, stick-on labels which bear the name of the country of origin comply with his regulations; and whether he is satisfied that they are a proper method of indicating the manufacturers and country of origin.

Mr. P. Thorneycroft: Orders in Council made under the Merchandise Marks Act,

1926, always specify the manner in which the indication of origin should be applied. In some instances an adhesive label is allowed. The law does not require manufacturers' names to be indicated.

Mr. Smith: Does that mean that it is in order to import pottery and textiles with no stamp showing the country in which they were manufactured?

Mr. Thorneycroft: Each article of pottery has to be marked indelibly by stamping, printing, embossing or impressing.

Mr. Smith: Is the right hon. Gentleman aware that a large quantity of pottery is being exported from Japan to the American market with different markings of origin? Will he consult the interested organisations with a view to making representations to the authorities in the United States about this?

Mr. Thorneycroft: Our legislation does not run in the United States.

Mr. Ellis Smith: asked the President of the Board of Trade to what extent under his regulations merchants and manufacturers abroad can import into this country pottery or textiles marked "Foreign," "Empire," or with the country of origin, to suit their own convenience; and whether he will amend the Merchandise Marks Acts to enable a stricter control to be exercised.

Mr. P. Thorneycroft: These alternatives are permissible under the Merchandise Marks Act, 1926, and the Orders in Council issued thereunder, requiring marking of origin on imported textile piece goods and pottery.

Mr. Smith: Is the right hon. Gentleman satisfied with the administration of the Merchandise Marks Act?

Mr. Thorneycroft: Yes. I think the law as laid down in the Merchandise Marks Acts is administered satisfactorily.

Mr. Swingler: Does the President not remember that we raised this very point during the passage of the Act and tried to insist that the name of the country of origin should be marked on the goods, and that we were given an assurance that the situation would be much improved? It seems that these practices are still continuing.

Mr. Thorneycroft: This Question refers to the 1926 Act.

Revolving Fund for Industry (Applications)

Mr. Albu: asked the President of the Board of Trade how many applications have been received for loans from the Revolving Loan Fund established with counterpart funds in accordance with Command Paper No. 8918; how many have been approved; and what has been the average size of loan granted.

Mr. P. Thorneycroft: Three hundred and twenty-one applications for loans from the Revolving Fund for Industry had been received up to the end of March, and the Advisory Committee set up to examine them had recommended loans in 32 cases, subject to negotiation of the necessary agreements. These negotiations are in various stages and in a few cases are approaching completion. The average amount of the loans recommended is approximately £10,000.

Mr. Albu: Can the right hon. Gentleman say why the number of loans approved is such a very small proportion of the total applied for? Can he indicate the types of industries to which loans have been granted?

Mr. Thorneycroft: I could not answer the second part of that supplementary question without notice. There are a great number of industries that would feel that they would benefit from certain facilities for borrowing money, but I think it is right to concentrate lending to those cases from which real advantage to productivity may accrue through lending.

Ulster Commercial Vehicles (Irish Republic Import Duty)

Mr. McKibbin: asked the President of the Board of Trade whether he is aware that owners of commercial vehicles in the Irish Republic can bring such vehicles across the border into Ulster on payment of an annual fee of 2s. 6d., whereas owners in Ulster have to pay an import duty of one-third the value of the vehicle even if only one journey is made; and whether he will take action to remove this anomaly either by raising the import duty or by making representations to the Government of the Irish Republic, with a view to achieving reciprocity.

Captain Orr: asked the President of the Board of Trade whether he will make representations to the Irish Republican

Government, with a view to achieving reciprocal treatment for commercial vehicles crossing the border between Northern Ireland and the Irish Republic.

Mr. P. Thorneycroft: I am aware of this anomaly and I regret very much that the authorities in the Irish Republic, who know our views, have not so far corrected it.

Mr. McKibbin: Is my right hon. Friend aware that the duty on Ulster vehicles going into the Republic may amount to £1,000 or even more and that it is not recoverable? Is he aware also that the Board of Trade has been pressing the Dublin authorities, by correspondence, to give equitable treatment to Ulster for many years? Does he not consider that it is about time that he addressed them in the only way they can understand, and that is by the imposition of a quid pro quo on their vehicles coming north? Or are we to allow this injustice to be perpetrated in perpetuity?

Mr. Thorneycroft: I have some sympathy with my hon. Friend. I understand that there are some difficulties about treating imports from Southern Ireland in the same way as it treats imports from Ulster, but I will communicate with the Northern Ireland Government to ascertain their views on this subject.

Captain Orr: While not wishing to do anything to disturb normal trading relations between the United Kingdom and the Irish Republic, may I ask my right hon. Friend whether he is aware that this is a glaring example of inequitable treatment, and whether he will consider pursuing the action proposed by my hon. Friend?

Film Quota Defaulters (Prosecutions)

Mr. Swingler: asked the President of the Board of Trade how many prosecutions have now been initiated against film quota defaulters for the year 1951–52.

Mr. P. Thorneycroft: Proceedings have begun in three cases. Counsel is advising in a number of further cases and some are receiving consideration in Scotland.

Mr. Swingler: As there were over 1,000 cases of exhibitors failing to fulfil in this


year the quota of 30 per cent. of feature films, does the right hon. Gentleman regard this as satisfactory action?

Mr. Thorneycroft: I think the hon. Gentleman is mixing up failure to fulfil the basic quota with offences under the Act. They are separate things.

Overseas Countries (Subsidised Exports)

Mr. N. Macpherson: asked the President of the Board of Trade the policy of his Department when the interests of this country are adversely affected by the action of another signatory of the General Agreement on Tariffs and Trade in subsidising exports.

Mr. P. Thorneycroft: The General Agreement on Tariffs and Trade does not prohibit export subsidies, but provides for consultations if these cause or threaten serious prejudice to the interests of other member countries. We should invoke this provision of the Agreement where-ever this seemed likely to help us.

Mr. Macpherson: To what extent has this been invoked in the past, and what occasion has there been for invoking it?

Mr. Thorneycroft: It has practically never been invoked. It is of very limited application. It is necessary to show some serious prejudice to the trader in the country into which the goods are imported. Of course, the maximum damage always operates in third markets.

Lisbon Fair

Mr. A. Henderson: asked the President of the Board of Trade whether, in view of the failure to stage a British trade fair in Lisbon, he will make a statement on the steps to be taken to prevent the financial burdens of such projects abroad falling entirely upon a few private firms and individuals.

Mr. P. Thorneycroft: The decision not to hold the Lisbon Trade Fair was taken not because the firms concerned objected to the expense, but because it seemed unlikely that the Fair would be a success. It is usual for expenses to be covered by receipts, so the second part of the Question does not arise.

Mr. Henderson: Does the right hon. Gentleman not take the view that these

trade fairs play an important part in building up British exports and prestige? Does it not seem a pity, for the sake of £8,000, not to hold this fair, which, in the face of growing German competition, might well have made a useful contribution to our export markets?

Mr. Thorneycroft: I certainly agree that fairs can play a useful part in the promotion of our exports. We have to be guided by industrial advice, and particularly the advice of local businessmen on the spot, as we were on this occasion.

Preparations, Birmingham (Complaints)

Mr. Chapman: asked the President of the Board of Trade what steps he has taken to secure evidence that certain medical and cosmetic preparations, recently exposed as worthless by the Birmingham City analyst, have been on sale in shops; and whether he will now announce that proceedings are to be taken under the Merchandise Marks Act.

Mr. P. Thorneycroft: These preparations do not appear to be on sale in shops, but by mail. I am continuing my inquiries.

Mr. Chapman: Why did the President not get in touch with the people who made the original investigation? Is he aware that I have found out by a simple inquiry that this stuff, which he knows to be composed mainly of Epsom, Glauber and common salts, is called "Slimswift" and is made at 3, Grand Parade, Brighton, where there are three rooms, where, yesterday, I had a relative go along and offer to buy some of the stuff, and where it was on sale? Why does the right hon. Gentleman not take action? Why are his officials so dilatory that Members of the House have to do his work for him?

Mr. Thorneycroft: I am not being dilatory. I am grateful to the hon. Member for giving me the benefit of his inquiries. I am making my own inquiries, and if satisfactory evidence is available I shall consider a prosecution.

Mr. Chapman: Why have no inquiries been made of the city analyst, who could have given the right hon. Gentleman this information in the first place, in the same way as it was given to me? That is how I was able to follow up the investigation.

Mr. Thorneycroft: The same thought had occurred to me, and inquiries have been made.

Light Industries, Barry

Mr. Gower: asked the President of the Board of Trade if he will take steps to encourage light industries to come to Barry, in order to meet problems due to the absence since the war of the large coal shipments upon which the prosperity of the town and port was based.

Mr. P. Thorneycroft: A considerable amount of new industry has been established in and near Barry since the war. We should be glad to see further suitable developments in the area, but we have also to consider the needs of other parts of the Development Area and what resources are available.

Departmental Prosecutions

Lieut.-Colonel Lipton: asked the President of the Board of Trade how many prosecutions have been initiated by his Department since 1st February last; and for what breaches of the law these prosecutions were initiated.

Mr. P. Thorneycroft: Between 1st February, 1954, and 5th April, 1954, my Department initiated criminal proceedings in 95 cases. These involved offences under the Companies Acts, the Bankruptcy Acts, the Cinematograph Films Acts, the Statistics of Trade Act, Hire Purchase and Credit Sale Agreements (Control) Order, the Deeds of Arrangements Act, the Larceny Act, and the Registration of Business Names Act.

Lieut.-Colonel Lipton: Will the President amplify that reply and indicate what proportion of these prosecutions related to his duties under die Companies Acts and the Registration of Business Names Act? It seems clear that in the other fields where he could be active the right hon. Gentleman is showing a degree of inactivity which would justify an even bigger cut than £1,000 a year in the Ministerial salary.

Mr. Thorneycroft: I do not think that my success as President of the Board of Trade can be judged by the number of prosecutions I institute.

Traders (Stop List)

Mr. Robens: asked the President of the Board of Trade if he will make a particular reference to the Monopolies Commission of the practice whereby trade association's fine traders for giving a discount upon articles sold, and exact this fine by threatening to place the trader upon the association's stop list.

Mr. P. Thorneycroft: This practice falls within the scope of the general inquiry which the Commission are already conducting under Section 15 of the Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948.

Mr. Robens: When does the right hon. Gentleman expect the result of the inquiry, which has now been under way for a considerable time?

Mr. Thorneycroft: Not in the immediate future. It raises large and complex issues.

Gloves (Imports from Hong Kong)

Mr. Janner: asked the President of the Board of Trade whether he is aware that many of the gloves imported into this country from Hong Kong have previously been imported into Hong Kong, where their trade marks have been removed and some embroidery added after which new labels marked made in Hong Kong have been added; and if he will take steps to prevent such goods from flooding the market here to the detriment of English manufacturers.

Mr. P. Thorneycroft: I have received no evidence to support the allegations to which the hon. Member refers. If he will provide me with details of any specific case I shall gladly investigate it.

Mr. Janner: Has the Minister made any inquiries in this matter? Does he not know that the quantity of knitted gloves now being sent out of Hong Kong is in excess of any that can be fully manufactured there? How does he account for the fact that gloves of this nature are coming in marked "Made in Hong Kong," when many of them are undoubtedly made outside Hong Kong?

Mr. Thorneycroft: I have made very close inquiries and am informed that knitted woollen gloves made in Japan and merely embellished or embroidered in Hong Kong would not enjoy Imperial Preference.

Mr. Janner: Will the Minister make further inquiries, and, if he finds that these gloves have been sent to Hong Kong, and only 25 per cent. value has been added there, will he stop this practice?

Mr. Thorneycroft: I have made very close inquiries. If the hon. Member has any further evidence, I shall be glad to consider it.

Mr. Janner: asked the President of the Board of Trade whether he is aware that cheap labour plus a freedom from Customs tariffs result in gloves made in the Far East being sold at prices below those charged for British manufactures, and what steps he proposes to take to assist British manufacturers.

Mr. P. Thorneycroft: I have received complaints that knitted woollen gloves made in Hong Kong are being sold here at lower prices than gloves made in the United Kingdom, but have no evidence of malpractice in this trade. It would be contrary to the policy of Her Majesty's Government to impose protective quotas or duties on imports from Hong Kong or any other Colonial Territories.

Mr. Janner: Does the right hon. Gentleman realise that his reply as to comparison of prices is an understatement and that these gloves are being sold at less than half the price at which they can be manufactured in this country? Will he also inquire into the position regarding employment, figures having been given which, in the view of Leicester manufacturers, are not correct? Will he also assure the Leicester manufacturers and others that he will take steps to stop this practice?

Mr. Thorneycroft: The hon. Member is raising separate points. I am not concerned here with the question of price at which the gloves are sold, but with whether they are manufactured in Hong Kong. If they are manufactured in Hong Kong, of course they qualify for Imperial Preference.

Mr. Janner: In view of the unsatisfactory answers which have been given, I shall seek an early opportunity of raising this matter on the Adjournment.

Savoy Hotels, Ltd. (Directors' Observations)

Mr. E. Fletcher: asked the President of the Board of Trade if he is now in a position to state what steps he intends to

take about the observations received from the directors of the Savoy Hotels, Ltd.

Mr. P. Thorneycroft: No, Sir; this matter is still under consideration.

Mr. Fletcher: I am sure the President will agree that this matter ought not to be left in suspension much longer. He has had these observations for about a month. When will he be able to make a statement to the House?

Mr. Thorneycroft: These matters raise complicated points of company administration and law. I am pressing on with these investigations as quickly as I can and I should hope to be able to make an announcement about it fairly soon.

Mr. Jay: Is this yet another example of what the Prime Minister called the fanatical activity of the President of the Board of Trade?

Mr. Thorneycroft: I hope it is an example of the cool, calm and calculated consideration that I give to all matters.

Oral Answers to Questions — CIVIL SERVICE

Political Activities

Mr. Peter Freeman: asked the Financial Secretary to the Treasury whether he will now publish a table showing the total number of civil servants in each Department; the numbers who are now allowed to take part in all political activities; the number allowed to take part in certain political activities, and how this restriction applies; and the number who are not allowed to take part in any political activities at all as a result of Command Paper No. 8783.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): As the answer contains a very large number of very complicated figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Freeman: Could the right hon. Gentleman give us the total number involved in this Question, and say why it is that a large number of responsible people are deprived of these political rights, which are recognised by the United Nations as necessary and justifiable?

Mr. Boyd-Carpenter: On the first point, perhaps the hon. Gentleman will look at the answer. On the second, when he does look at it, I think he will find that the result as compared with the position under previous schemes is not unsatisfactory.

Following are the figures:


POLITICAL ACTIVITIES OF CIVIL SERVANTS



INTERMEDIATE GROUP (See Note 6)



Department
Staff of Department on 1st January, 1954
Free group (See Note 5)
Standing permission to engage in all political activities for which members of group are eligible
Required to seek permission individually to engage in any of the political activities for which members of group are eligible
Remain der of group (see Note 7)
Total in group
Restricted group (See Note 8)


Admiralty
33,922
2,912
21,423
12
—
21,435
9,575


Agriculture and Fisheries
13,067
1,532
5,147
2,550
—
7,697
3,838


Air
26,569
3,198
17,562
14
305
17,881
5,490


Customs and Excise
15,210
2,532
3,360
15
—
3,375
9,303


Education
2,993
599
—
—
1,269
1,269
1,125


Food
17,759
2,674
4,112
6,821
—
10,933
4,152


Foreign Office
5,579
1,018
619
1,458
—
2,077
2,484


Forestry Commission
2,233
90
629
973
—
1,602
541


Fuel and Power
2,550
263
1,161
185
—
1,346
941


Health
6,046
1,236
—
—
3,390
3,390
1,420


Home Office
3,382
456
—
—
1,619
1,619
1,307


Housing and Local Government
3,252
332
—
—
1,349
1,349
1,571


Inland Revenue
53,445
3,421
8,197
28,233
—
36,430
13,594


Labour
25,700
3,517
4,496
11,668
—
16,164
6,019


National Assistance Board
9,943
676
1,821
4,124
—
5,945
3,322


Ordnance Survey
4,317
4,001
—
257
—
257
59


Pensions and National Insurance
38,826
3,494
17,388
10,685
—
28,073
7,259


Post Office
258,531
215,494
32,143
1,834
—
33,977
9,060


Prison Commission
6,663
5,118
801
—
—
801
744


Scientific and Industrial Research
3,073
135
1,482
447
—
1,929
1,009


Stationery Office
3,118
1,154
867
676
—
1,543
421


Supply
32,934
2,686
13,550
5,398
—
18,948
11,300


Trade
7,169
1,116
3,078
485
—
3,563
2,490


Transport and Civil Aviation
10,756
2,804
3,618
546
—
4,164
3,788


War Office
39,287
2, 073
31,411
42
—
31,453
5,761


Works
14,508
2,306
8,661
11
—
8,672
3,530


OTHER DEPARTMENTS
28,085
5,723
10,227
1,865
850
12,942
9,815


TOTAL (non-industrial staff)
668,917
270,560
191,753
78,299
8,782
278,834
119,918


Add industrial staff all Departments
427,223
427,223
—
—
—
—
—


GRAND TOTAL
1,096,140
697,783
—
—
—
278,834
119,918


NOTES


1. As a number of Departments are in consultation with their Departmental Whitley Councils about the classification of staff, the figures are given provisional.


2. Departments with staffs totalling fewer than 2,000 are included, but are not shown separately.


3. Part-time staffs are included and counted as wholetimers.


4. The Department of Atomic Energy has been omitted.


5. Members of this Group are free from all restrictions.


6. Members of this Group are eligible for permission to engage in all political activities, national and local, except Parliamentary candidature, subject to a code of discretion.


7. The staff here shown will be subject to special rules, notably in respect of local political activities.


8. Members of this Group are debarred from engaging in national political activities, but are free to seek permission to engage in local political activities.

Superannuation Pensions (Payment)

Mr. N. Macpherson: asked the Chancellor of the Exchequer what saving in clerical establishment would be involved if civil servants' superannuation pensions were to be paid three-monthly instead of monthly; and what he estimates would be the annual financial saving to the Exchequer.

Mr. Boyd-Carpenter: About 20 clerical staff, paid some £9,300 a year.

Mr. Macpherson: Is there any reason why this economy should not be made since teachers' salaries are already paid three months in arrear? If there is any reason why it should not be made is the reason not equally applicable to the teachers' case.

Mr. Boyd-Carpenter: The question of teachers' pensions is a matter for my right hon. Friend the Minister of Education. The pensions of civil servants are regulated by the Superannuation Act.

Oral Answers to Questions — NATIONAL FINANCE

Private Banking Account Interest Disclosures (Revenue)

Mr. N. Macpherson: asked the Chancellor of the Exchequer what additional revenue he estimates has resulted from the provision in the Finance Act, 1951, authorising the disclosure by banks of private banking accounts to the Inland Revenue.

Mr. Boyd-Carpenter: There is no provision authorising disclosure of private banking accounts. Section 27 of the Finance Act, 1951, authorised only disclosure of interest paid or credited in excess of £15 per annum. Up to 31st March, 1953, the amount of unassessed tax and penalties recovered as a result of this Section was £7 million. Since that date separate figures are not available.

Hospital Consultants (Expenses)

Mr. Marlowe: asked the Chancellor of the Exchequer (1) what consultations have taken place between the Treasury and the Ministry of Health with regard to the expenses of hospital consultants employed in the National Health Service which are not deductible

for Income Tax purposes; and what steps he proposes to meet this problem;
(2) whether he is aware that hospital consultants employed in the National Health Service incur many expenses for which they can make no Income Tax rebate claim on their Schedule E assessments; and whether he will introduce legislation to remedy this hardship.

Mr. Boyd-Carpenter: Hospital consultants are, like other employees, assessible under Schedule E, and the same rules with respect to expenses apply to them as to other taxpayers so assessed. I see no reason to propose legislation giving them preferential treatment. The general question of what expenses are admissible to such taxpayers is within the terms of reference of the Royal Commission.

Mr. Marlowe: Is my right hon. Friend aware that there is a case to be looked into here, because there is a conflict of opinion between the appointing authorities and the Revenue authorities? The appointing authorities will not appoint a consultant unless he has a motor car, a secretary and a telephone and the Revenue will not allow these for expenses. Therefore, a consultant has necessarily to incur expenses which he cannot deduct for tax purposes. Will my right hon. Friend look into the matter?

Mr. Boyd-Carpenter: I have seen the letter which my hon. and gallant Friend sent to my right hon. Friend on this subject. The Revenue authorities are bound to apply the existing law, and it is perfectly clear that these taxpayers are liable to be assessed under Schedule E. On the question of motor cars, consultants get mileage allowances, and Questions on that subject are for my right hon. Friend the Minister of Health.

Mr. Marlowe: My right hon. Friend answered my first Question by saying that he would not be prepared to introduce legislation, but does not the latter part of his answer show that new legislation is required? Would he look at it again, because it affects them rather hardly?

Mr. Boyd-Carpenter: The broad question is within the terms of reference of the Royal Commission. I cannot see any justification, pending the issue of its


Report, for treating these people for tax purposes in any way different from other taxpayers who are taxed as employees.

Dr. King: Is the right hon. Gentleman aware that consultants are not treated the same as general practitioners for this purpose? Will he not try to make an adjustment as between the consultants and general practitioners?

Mr. Boyd-Carpenter: That is just the sort of question which is for my right hon. Friend the Minister of Health. I am concerned only with the administration of the tax law.

Mr. Marlowe: Owing to the unsatisfactory nature of that reply, I beg to give notice I shall raise the matter at the earliest opportunity.

India (Loan Conditions)

Mr. H. Wilson: asked the Chancellor of the Exchequer how far the mission sent by the International Bank for Reconstruction and Development to India is insisting that loans to India shall be dependent upon India's accepting the principle of private enterprise in the industries affected; and whether he will give instructions to the United Kingdom representative on the board of the Bank to press than no such political conditions should be attached to the Bank's loans.

The Economic Secretary to the Treasury (Mr. R. Maudling): There have recently been several International Bank Missions to India and I do not know to which the right hon. Member is referring.
On the second part of the Question, I would refer the right hon. Member to Section 10 of Article IV of the International Bank Agreement, which provides expressly for the exclusion of political considerations from decisions of the Bank.

Mr. Wilson: While thanking the hon. Gentleman for that answer, may I ask whether he is aware that there has been a report in the Ceylon Press recently to the effect that the World Bank Mission is putting pressure of this kind on the Indian Government? In view of the statements made at the time of the Colombo Plan, and also of authoritative American reports, that public enterprise will be needed on a great scale in countries like India, will the hon. Gentleman make sure that the Charter of the Bank is upheld?

Mr. Maudling: I was not aware of that report, but I am grateful to the right hon. Gentleman for the opportunity of saying that, so far as Her Majesty's Government are concerned, we stand entirely by the original Article of the Bank which says that in making its decisions the Bank and its officers shall consider only economic considerations as being relevant.

Purchase Tax Registration

Mr. Burden: asked the Chancellor of the Exchequer why he is unable to give separate figures for wholesalers and manufacturers who have defaulted in, or evaded payments of, Purchase Tax during 1953, in view of the fact that each are separately registered.

Mr. Boyd-Carpenter: Because Customs' head office records are not kept in this form, and detailed examination of the local records would be necessary. This would involve altogether disproportionate labour and expense. In any event, many registered traders are both wholesalers and manufacturers.

Mr. Burden: In view of the fact that on several occasions recently Her Majesty's Commissioners for Customs and Excise have withdrawn the wholesale registration while allowing registration to remain with the same firms for a part of their business which is manufacturing, thereby making it clear, and in accordance with the Act, that they are separate registrations, why cannot this information be given?

Mr. Boyd-Carpenter: I think, when my hon. Friend has studied my answer, he may understand why this information cannot be given.

Mr. Burden: asked the Chancellor of the Exchequer the amount saved in administrative costs by the Commissioners for Customs and Excise during the year ended 31st December, 1953, as a result of Purchase Tax registration being withdrawn from wholesalers during the year.

Mr. Boyd-Carpenter: I cannot give a precise figure.

Mr. Burden: As, during a recent debate on the Adjournment, my right hon. Friend stated, and in letters it has been stated, that one of the reasons for withdrawing Purchase Tax registration


from wholesalers is to save administrative costs, why should we not be told of the approximate amount of saving effected by this action?

Mr. Boyd-Carpenter: Because it is impossible to break down the precise elements in the cost of administration of a large service such as this in order to say that one element would be saved and one would not. It is perfectly clear, however, that the larger the number of points at which this tax is collected, the higher the administrative cost.

Mr. Burden: But in view of the fact that, when withdrawing wholesale Purchase Tax registrations, a greater number of registrations in many cases have to be given to manufacturers who supply the wholesalers, might it not increase the cost of administration by increasing the number of registrations with manufacturers?

Mr. Boyd-Carpenter: That is a hypothetical question and it is not on the Order Paper.

Mr. Burden: asked the Chancellor of the Exchequer from how many wholesalers Purchase Tax registration was withdrawn during 1953.

Mr. Boyd-Carpenter: Separate figures are not available for wholesalers as distinct from other registered traders. I gave my hon. Friend the total figure on 1st April.

Mr. Burden: But it is not the total figure that I want. In view of the fact that complaints about the withdrawal of registrations have come from wholesalers, are we to take it that all the registrations which have been withdrawn have been those of wholesalers? If not, will my hon. Friend look into the matter again and tell us how many have come from wholesalers and how many from manufacturers?

Mr. Boyd-Carpenter: As I explained to my hon. Friend in reply to his earlier Question, some traders are registered both as manufacturers and as wholesalers. Consequently, it is impossible to give separate figures for the two categories.

Mr. Burden: In view of the fact that in some cases manufacturers, while acting also as wholesalers, have been allowed to retain their manufacturing licence, while

their wholesale registration has been withdrawn, surely it is possible to obtain those figures if my hon. Friend is willing to do so.

Mr. Noel-Baker: Can the Financial Secretary explain why he is so difficult about helping his hon. Friend?

Mr. Boyd-Carpenter: I have given my hon. Friend, during the last few weeks, a considerable amount of information, but he has an insatiable appetite for statistics, which I admire, though it gives me a great deal of trouble.

Oral Answers to Questions — MUSEUMS AND GALLERIES (STANDING COMMISSION'S REPORT)

Mr. Hollis: asked the Chancellor of the Exchequer whether his attention has been called to the serious situation of the British Museum as disclosed in the current Report of the Standing Commission on Museums and Galleries; and whether he will make a statement.

Mr. Jay: asked the Chancellor of the Exchequer whether his attention has been called to the Report of the Standing Commission on Museums and Galleries about the present condition of the British Museum; and what action it is proposed to take.

Mr. K. Robinson: asked the Chancellor of the Exchequer if his attention has been drawn to the Report of the Standing Commission on Museums and galleries, and in particular to the Commissioners' references to the British Museum; and what action he proposes to take to remedy the unsatisfactory state of affairs revealed in this Report.

Mr. Wyatt: asked the Chancellor of the Exchequer whether he will make a statement on the Report of the Standing Commission on Museums and Art Galleries.

Mr. E. Fletcher: asked the Chancellor of the Exchequer whether in view of the Report of the Standing Commission on Museums and Galleries, he will increase the current grant to museums and art galleries; and, in particular, take immediate steps to remedy the deficiencies of staff and accommodation at the British Museum.

Mr. M. Stewart: asked the Chancellor of the Exchequer whether he has studied the Report of the Standing Commission on Museums and Galleries, describing the position of the British Museum as disquieting; and what measures he is prepared to take to remedy this situation.

Mr. Boyd-Carpenter: The Fourth Report of the Standing Commission on Museums and Galleries spans the years 1949 to 1953. Despite the difficulties of the time, the Report recognises that considerable progress was made by the national institutions during this period and it is unfortunate that some comments on this Report, while emphasising the needs of the museums, have tended to overlook its many references to important developments.
In the period covered by the Report, net expenditure on the Votes of the national institutions, excluding the cost of buildings and equipment borne on the Votes of other Departments, rose from £1,256,000 in 1949–50 to £1,468,000 in 1953–54. Moreover, while the size of the Civil Service generally was reduced, staff in these institutions rose from 2,255 in 1952–53 to 2,348 in 1953–54. Steady progress was made both with the restoration of severe war damage, and in providing new accommodation. Notable developments were the opening of Ham House, Apsley House and Osterley Park, as off-shoots of the Victoria and Albert Museum, and the reopening of the London Museum, which had been closed since 1939.
The Estimates for this year show a further increase of some 12 per cent., to £1,644,000, in the net provision; and staff will go up by some 4 per cent., from 2,348 to 2,451. I am glad to be able to announce a further increase in the grants-in-aid for purchase of works of art. These were increased by 25 per cent. last year and will be increased by a further 20 per cent. all round, making an increase of 50 per cent. since 1952–53, in addition to special grants made from time to time. For example, a grant of £82,000 was made to the British Museum in 1951–52 towards the purchase of the Holkham Hall Library and the Helming-ham Hall "Orosius" Manuscript. [HON. MEMBERS: "Too long."] I am sorry, but this is the answer to six Questions.

Mr. Ross: The Scots would not get away with that.

Mr. Boyd-Carpenter: More recently, the National Gallery has been enabled to buy Gainsborough's "The Morning Walk."

Mr. Follick: On a point of order. As the answer is so long, would it not have been better if the right hon. Gentleman had answered these Questions separately, and saved time?

Mr. Speaker: But for that point of order, we might have come to the end of the answer.

Mr. Boyd-Carpenter: I am glad to say that I agree with you, Mr. Speaker.
With regard to the British Museum, including the Natural History Museum, the Trustees sent to my right hon. Friend in October last a comprehensive appraisal of the museum's needs. Regard was had to this when the provision for the current financial year was settled, although I should not claim that we were able to provide for all that the Trustees would have wished to see done. Nevertheless, the net provision this year, at £740,000, shows an increase of 11 per cent. over 1953–54 and of 48 per cent. over 1949–50; staff numbers will be increased by 42. Building work will begin on the reconstruction of the Greek and Roman Rooms at the British Museum and the East Wing Herbarium at the Natural History Museum.
Though a good deal has been done, we realise that there is a great deal more which it would be desirable to do, and we shall continue to deal with the claims of our national museums and galleries as sympathetically as the general economic situation allows.

Mr. Hollis: Is my right hon. Friend aware that the House is extremely grateful to him for his comprehensive answer? Is he further aware that it is not a mere matter of convenience but of national economy in the broad sense that there should be a place in this country where everyone can conveniently get access to any printed material? Will he not also agree that it is a danger to the national economy if, owing to circumstances not due to this Government but due to the inevitable dislocation of war, a cataloguing system, which would fill that need, should fall into dislocation?

Mr. Boyd-Carpenter: I agree with my hon. Friend that there is very important work to be done here, and it is for that reason, despite the needs for national economy, that we have made increased provision in the current estimates, a subject to which I have already referred.

Mr. Fletcher: The right hon. Gentleman has read out a lot of figures which are very difficult to follow, but does it not remain true that the Commission stated that unless more funds are made available our national institutions will not be able to maintain the standard of prestige we expect of them in these days, when cultural and artistic appreciation is increasing?

Mr. Boyd-Carpenter: I agree with the hon. Gentleman that this is a field in which very large sums of money can be usefully spent, but it is a case of holding the balance between the needs of national economy and providing some necessary increase, as we are doing this year.

Mr. Robinson: Is the right hon. Gentleman aware that public opinion has received this Report with a great deal less complacency than he and his Department? Would he not agree that it was abject folly on -the part of his right hon. Friend the Chancellor of the Exchequer to cut the grants to the museums in 1952, as we on this side of the House said at the time?

Mr. Boyd-Carpenter: I hope the hon. Gentleman is not going to try to make a party point about the findings of the Commission which covers a period 57 per cent. of which was during the late Administration's term of office. So far as the hon. Gentleman's first point is concerned, this Report was written before those concerned could have seen the Estimates for the current year.

Mr. Jay: While it is quite natural for the Financial Secretary to need a lot of time to defend himself on this issue, is it not quite clear from the Report that great damage was done by the foolish and futile efforts of the Government to save a small sum of money two years ago?

Mr. Boyd-Carpenter: Neither the Report nor the facts justify any of the right hon. Gentleman's adjectives.

Sir R. Perkins: Are the Government going ahead with the British Museum Bill,

which was introduced nearly three years ago, or are they waiting for the British Museum (Amendment) Bill?

Mr. Boyd-Carpenter: I know of no such Bill in the present Session.

Mr. M. Follick: Is the Minister aware that the British Museum was founded on the results of a national lottery, and as Gibraltar has a licence under the Crown for a lottery, could we not have one in this country to supply some of these needs?

Mr. Boyd-Carpenter: That is almost the only question on this subject which is not on the Order Paper.

Oral Answers to Questions — AGRICULTURE

Spring Vegetables (Supply)

Mr. Dodds: asked the Minister of Agriculture the prospects in respect of the supply of vegetables in the late spring.

The Minister of Agriculture and Fisheries (Sir Thomas Dugdale): Vegetables in season from the middle of April until the end of May consist mainly of spring cabbage and winter cauliflower, with swedes and carrots available until about the middle of May. There are ample supplies in prospect of root vegetables. As a result of the severe frost at the end of January and the beginning of February, supplies of spring cabbage and especially winter cauliflower have been substantially below normal for the time of year. If, however, the weather remains favourable, cutting is expected to increase from now onwards, and approach the normal level during May.

Mr. Dodds: Do I understand that no provision is being made outside this country to import vegetables? In view of their great scarcity and the way prices are going up, can the right hon. Gentleman tell the housewife that there is nothing to worry about?

Sir T. Dugdale: I think the hon. Gentleman has it all wrong. There is no quota restriction on the import of vegetables from our usual overseas sources of supply. Up to now I understand that, generally, the retail prices of vegetables have been lower this year than they were last year.

Humane Rabbit Trap

Mr. Peter Freeman: asked the Minister of Agriculture whether he has now completed the trials with the new Imbra humane rabbit trap; what steps he is taking for its introduction; and when they will become effective.

Sir T. Dugdale: With regard to the first part of the Question, I would refer to the reply given on 18th February last to my hon. and gallant Friend the Member for Wembley, North (Wing Commander Bullus). The production and sale of this trap is a matter for the manufacturers. It is already on sale.

Mr. Freeman: Can the right hon. Gentleman say when this trap will be made on such a scale that we shall be able to abolish the other? There is great public anxiety in view of the cruelty involved, and unless this production can be expanded it will take many years before the gin trap can be abolished.

Sir T. Dugdale: As I have told the House previously, we must be sure that we have the right answer. In this trapping year all the trapping done by the county committees will be by this trap and I shall have a report by the middle of May, showing exactly what the experience has been. It has been a big investigation but, by the middle of May, I ought to be able to inform the House of the results of this trapping season.

Major Anstruther-Gray: In searching for the most humane way of killing rabbits, will the Minister bear in mind that the long net, methodically used, may be a good solution of this problem?

Sir T. Dugdale: Certainly.

Mr. Hastings: Is the new Imbra trap a complicated and expensive apparatus, or relatively simple?

Sir T. Dugdale: It is certainly more expensive than the present gin trap. Its price is 10s. 6d. compared with the gin, which ranges between 3s. 6d. and 7s. 6d. It is no less complicated in its mechanism, but I understand that it takes a long time to set.

Boars (Breeding Licences)

Mr. Remnant: asked the Minister of Agriculture the procedure for obtaining a breeding licence for a non-pedigree

boar; and what method of appeal is available to the applicant under his regulations.

Sir T. Dugdale: An applicant for a breeding licence for a boar, whether pedigree or non-pedigree, is required to submit the animal for inspection by one of my officers. If a licence is refused, the applicant may appeal within 14 days and request a second inspection by a referee appointed from a panel of nominees of approved pig breeding societies and the National Farmers' Union. Under the Improvement of Livestock (Licensing of Bulls) Act, 1931, and the Agriculture (Miscellaneous Provisions) Act, 1944, the referee's decision is final.

Mr. Remnant: My right hon. Friend will surely agree that his livestock officers are not allowed to approve non-pedigree boars for breeding. In view of that, is it not unfair to put the referee in the position of juror, judge and appeal court?

Sir T. Dugdale: The referee is at liberty to do exactly what he likes. In fact, the licensing of boars started on 1st April, 1946, and during the eight years the system has been in operation it has worked very satisfactorily.

Mr. Follick: If, in a breeding licence for a non-pedigree boar, the word was spelt "bore" would it make any difference?

Mr. Spearman: asked the Minister of Agriculture whether his Regulations allow a licence to use Landrace boars for breeding purposes to be granted to boars which are not pure bred.

Sir T. Dugdale: As I said in reply to my hon. Friend, the Member for Maidstone (Sir A. Bossom), on 31st March, it is my policy to licence only those boars that are pure-bred, whatever their breed. This is because the purpose of licensing is to ensure that boars used for breeding will breed true to type, and this cannot be achieved by the use of cross-bred boars.

Mr. Spearman: As my right hon. Friend has decided to deny to these impure animals the natural right to breed and live, does he not think it would save the farmer from loss and the Ministry from expense if, instead of sending inspectors and then referees to the farms,


the position of these unfortunate animals could be made clear from the beginning?

Sir T. Dugdale: No, Sir, the referee is there to make a decision entirely irrespective of the first inspection which takes place and I am bound, as well as the owner of the boar, by that decision. If he thinks fit, the referee can licence a non-pedigree boar.

Mr. Remnant: How can my right hon. Friend reconcile his statement that his policy is to licence only pedigree boars when he gives the routine for licensing cross-breds?

Sir T. Dugdale: If my hon. Friend looks at the answers he will see that they tie up.

Machinery Service, Dorset

Mr. Crouch: asked the Minister of Agriculture for what reason Dorset was the only county in the south of England, with the exception of the Isle of Wight, to maintain an agricultural executive machinery committee; what profit or loss has been made by the Dorset committee during the last two years; and what were the figures in each year.

Sir T. Dugdale: The County Machinery Service in Dorset is being maintained to deal with reclamation and similar work involving the use of specialised machinery. Experience has shown that private contractors are not at present available to deal with all the work of this kind that has be done.
During the past two years, operations in the county resulted in losses of £5,597 and £1,518 respectively, representing the recovery of 83.3 per cent., and 94.9 per cent., of total expenditure.

Mr. Crouch: In view of these losses, does not my right hon. Friend think it would be wiser to wind up the Dorset committee as he has done other committees in the West Country? May I ask, further, how much greater would have been the loss had it not been for work done at Crichel Down?

Sir T. Dugdale: No, Sir. The Dorset committee is doing good work. The loss in the financial year, 1953–54, is not expected to exceed £2,000, and it is hoped that the service will be self-supporting in 1954–55.

Oral Answers to Questions — DISTANT-WATER FISH (LANDINGS AND PRICES)

Mr. Dodds: asked the Minister of Agriculture the average price per cwt. and the landings of distant-water fish taken from 1st January, 1954, to the latest convenient date; and the comparable figure for 1951.

Sir T. Dugdale: Landings of distant-water fish from 1st January to 31st March this year amounted to 1,695,000 cwt. at an average price of 50s. 1d. per cwt. The comparable figures for 1951 are 2,251,000 cwt. at an average price of 48s. 4d. per cwt.

Oral Answers to Questions — SECRET AGREEMENTS (PUBLICATION)

Lieut.-Colonel Lipton: asked the Prime Minister whether he will now publish all secret agreements with other countries made by Her Majesty's Government during the Second World War.

The Prime Minister (Sir Winston Churchill): No, Sir; unless I believe it to be in the public interest—

Mr. Dodds: Tory Party interest.

An Hon. Member: Almost the same thing.

The Prime Minister: On occasion the two may be identical—No, Sir; unless I believe it to be in the public interest, and the consent of the other parties concerned has, where necessary, been obtained in each case.

Lieut.-Colonel Lipton: The Prime Minister having referred to the public interest as the over-riding consideration, is he willing to give an assurance that the future publication of these agreements, subject to the conditions he has mentioned, will be motivated solely by consideration for public interest and not for the purpose of promoting sterile squabbles of a purely party political nature?

Oral Answers to Questions — QUEBEC AGREEMENT (HYDROGEN BOMB)

Mr. Benn: asked the Prime Minister whether the consultation arrangements provided by the Quebec Agreement covered the future use of the hydrogen bomb.

The Prime Minister: The Quebec Agreement of 1943 dealt with the atomic bomb. The United States Government's decision to proceed with work on a hydrogen bomb was not taken until 1950. When the agreement was made we did not, of course, know whether the hydrogen bomb would ever become a reality.
Had the Quebec Agreement remained in force until the hydrogen bomb became a practical reality with the explosion of November, 1952, I should have regarded its provisions as applying to the hydrogen bomb also.

Mr. Benn: Has the attention of the Prime Minister been drawn to statements issued both from the White House and by Mr. Truman to the effect that the Quebec Agreement did not cover the hydrogen bomb? In these circumstances, would it not be fairer to withdraw his charge that the Labour Government gambled with Britain's vital interests in this matter in view of the fact that there was never an agreement for consultation on the hydrogen bomb? May I further ask whether, in view of the importance he attaches to the hydrogen bomb, the right hon. Gentleman himself has made any approach to the American Government to negotiate an agreement, or for consultation?

The Prime Minister: I think that all those serious, complicated, questions had better be set out separately on the Order Paper.

Mr. Shinwell: As in the debate last Monday we were concerned not so much with the atom bomb but with the hydrogen bomb tests and the future use of the hydrogen bomb, was it really necessary for the right hon. Gentleman, in view of the Quebec Agreement, which referred exclusively—as he has just said—to the atom bomb, to introduce extraneous matters?

The Prime Minister: I certainly thought over my action before I took it—[HON. MEMBERS: "Answer."] I certainly considered that the hydrogen bomb was, in a certain sense, the child and successor of the atom bomb.

Mr. Shinwell: Since the right hon. Gentleman gave serious thought to the subject before he made his statement last Monday, can he tell the House whether he has given any thought to what he did since?

The Prime Minister: I endeavour to allow my thoughts to play in retrospect, as well as in prospect, over all my actions.

Mr. Benn: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment.

Oral Answers to Questions — ALFORD DRAINAGE AND LINCOLNSHIRE RIVER BOARDS

Commander Maitland: asked the Minister of Agriculture (1) how many members on the Alford Drainage Board and the Lincolnshire River Board represent the coastline between Mablethorpe and Ingamells, inclusively;
(2) how many members of the Lincolnshire River Board represent territorially the coastline between Skegness and Wainfleet, inclusively.

Sir T. Dugdale: The lengths of coastline referred to lie within the County of Lindsey. One is within the Alford and the other within the Skegness Internal Drainage District. Six members of the river board are appointed by the Lindsey County Council and one of the members appointed by me was nominated by the Alford and one by the Skegness Internal Drainage Board.
These drainage boards are elected bodies. The greater part of the membership of the Alford board comes from the area draining to the length of coastline referred to in the first Question.

Oral Answers to Questions — CONTROL OF DOGS ORDERS (PROSECUTIONS)

Mr. Peter Freeman: asked the Minister of Agriculture what prosecutions have been instituted under the Control of Dogs Order, 1920, and the Control of Dogs (Amendment) Order, 1920, in respect of dogs found in highways or places of public resort without collars bearing the name and address of the owner since the orders came into force; and what were the results of such prosecutions.

Sir T. Dugdale: I assume that the hon. Member is referring to the two Orders of 1930. These Orders are enforced by


local authorities, and I have no information as to the number of prosecutions instituted by them.

Mr. Freeman: Is the right hon. Gentleman aware that of the half million dogs in this country fewer than 10 per cent. have their names and addresses on their collars? Can he say how he proposes to deal with the matter?

Sir T. Dugdale: I do not think it is the duty of the Government to supervise local authorities in the enforcement of these provisions.

BUSINESS OF THE HOUSE

Mr. Attlee: May I ask the Lord Privy Seal to state the business for next week?

The Lord Privy Seal (Mr. Harry Crookshank): Yes, Sir. The business for next week will be as follows:
MONDAY, 12TH APRIL—Conclusion of the general debate on the Budget and the Economic Situation.
Motions to approve: Representation of the People Regulations.
Similar Regulations for Northern Ireland and Scotland.
TUESDAY, 13TH APRIL—Third Read-big: Housing Repairs and Rents Bill.
WEDNESDAY, 14TH APRIL—Report stage: Budget Resolutions.
Committee and remaining stages: Telegraph Bill, which it is hoped to obtain by about 7.30 p.m.
Motion to approve: Draft Visiting Forces (Application of Law) Order.
THURSDAY, 15TH APRIL—It is proposed to meet at 11 a.m. and Questions will be taken until 12 noon.
Adjournment for the Easter Recess until Tuesday, 27th April.

Mr. H. Johnson: Having regard to the intense public interest in the matter, may

I ask my right hon. Friend whether he can give time for the consideration of a Motion in the names of hon. Members on both sides of the House relating to cruelty in the Grand National?

Mr. Crookshank: No, Sir. I do not see any prospect of giving any Government time for a matter with which the Government are not directly concerned.

Mr. Johnson: Having anticipated the unsatisfactory nature of my right hon. Friend's reply may I give notice that I am raising the matter on the Adjournment on 29th April.

PERSONAL STATEMENT

Mr. H. Morrison: With your permission, Mr. Speaker, I desire to make a personal statement, a copy of which I have supplied to the Prime Minister.
In the course of Monday's debate on the hydrogen bomb, I intervened during the Prime Minister's speech and said:
I understood that the right hon. Gentleman had made a private and secret agreement on this matter with President Roosevelt which was not published. Of course, we were aware of it—those of us who were entitled to know-but at the time it was surely a secret, confidential agreement."—[OFFICIAL REPORT, 5th April, 1954; Vol. 526, c. 53.]
As the House will appreciate, it is dial-cult to recall the details of Cabinet proceedings which occurred some years ago. I have since made inquiries, as was my right, having been a member of the War Cabinet, and I find I was in error in saying:
Of course, we were aware of it—those of us who were entitled to know.…
The Prime Minister's agreement with President Roosevelt was essentially of a personal character. Neither before, during nor after their discussions on this matter was the War Cabinet informed or its authority sought for the agreement. It is, I think, right that this should be made clear.

ENTENTE CORDIALE

3.34 p.m.

Mr. Maurice Edelman: I beg to move,
That this House, in recognition of the fact that this year marks the fiftieth anniversary of the founding of the Entente Cordiale and that for the past half-century the close and friendly relations thus established between France and Great Britain have been loyally maintained and of great mutual value both in war and peace; that Franco-British friendship—of which the Dunkirk Treaty of Alliance and Mutual Assistance is a recent manifestation—is one of the foundation stones on which the post-war policies of France and Great Britain have been built, and is essential for the security and prosperity of Western civilisation; and that it is the common desire of the peoples of our two countries that this close understanding, which has so well withstood the test of time, should be preserved and diligently developed, hereby resolves that a Message of Greeting and Good Will should be conveyed to the Assemblée Nationale to mark the first fifty years of the Entente Cordiale and to give an assurance that the tradition of Anglo-French solidarity which has grown up during this period will continue to be a constant and guiding principle of our foreign policy over future decades.
This Motion records that today is the fiftieth anniversary of the signature of the Anglo-French Agreement which marked the foundation of the Entente Cordiale, and it seeks to convey from this House a message of greeting and good will to France on this happy occasion.
"The Times" of 9th April, 1904, wrote with an enthusiasm which went far beyond the conventional flatteries on such occasions, that the agreement was of "historic importance" and "a landmark in the policy of the two nations." Furthermore, it added a warm tribute to "the part played in the furtherance of Anglo-French cordiality" by His Majesty King Edward VII.
Fifty years after those words were written we can endorse both the description and the tribute. Indeed, it seems hard now to imagine that it was possible only 53 years ago for an hon. Member of this House to say that a war with France was inevitable. Without being dogmatic, I think one can say today that since that time the danger of war with France has receded. In fact, the Entente Cordiale today is stronger than it ever has been in any period during the last 50 years.
It is an alliance which has endured the harsh tests of war and occasionally even the harsher tests of peace. Yet whatever the strains, our nations have always triumphantly survived them. The reason is clear. No one can travel through the vast melancholy cemeteries of Northern France where the French and British dead lie side by side without recognising that the Entente Cordiale has been consecrated by our joint sacrifice in the battle against tyranny. Indeed, the geography of France is now part of our own history.
Three hundred thousand Frenchmen died in the first fortnight of the First World War during the first onrush of the enemy, and since then France, despite her terrible wounds, has never lagged in the fight against the enemies of liberty. It is a fight which she is always ready to renew.
Nor should we fail to recall how during the Second World War, at a time when the attack on the spirit of France was even more savage than the attacks of the enemy armies, Frenchmen still cherished their love of Britain; how, during the glorious years of resistance, Frenchmen who fought side by side with us welcomed the liberating armies because of the love of Britain which they cherished, that love which they fought to maintain and for which so many of them finally died. The welcome given by liberated France to the British Armies in 1944 was a demonstration that the Entente Cordiale still lived and nothing that the totalitarians could do would ever destroy it.
How fortunate were our two countries in those post-war years in the Ambassadors who have represented us. Perhaps I may say that if the Entente revived with new vigour after 1945, much of the credit belongs to M. René Massigli, that splendid and devoted Ambassador who will undoubtedly be remembered among the great Ambassadors of France. We too, for our own part, had the incomparable advantage of having Duff Cooper in Paris, a courageous statesman, a distinguished man of letters and a philosopher in his life, whose far too early death we all mourn.
I have spoken of our cordial understanding with France, but let me not appear to suggest that we never have


differences of opinion. Monolithic friendships belong to totalitarian countries and rarely last very long. When the French try us beyond endurance, we sometimes reach for strong language and refer to their defects as "engaging" and when we exasperate the French beyond the limits of endurance by our pragmatism they usually sum up the matter by saying, "Ah, les Anglais!"
But our methods of approach are of minor and trivial importance compared with the fundamental unity of purpose which binds our two countries. More vital than treaties, more binding even than citizenship is the fact that we both represent and share in the standards and values of Western civilisation. That is the irrevocable bond which unites us in the Entente Cordiale.
It is my hope and belief that today we are entering upon the second 50 years of the Entente Cordiale. Whatever the uncertain future, we can be sure of one thing—that, come what may, Britain and France will together continue to defend and to represent the high purposes for which the Entente Cordiale has stood for so many years. It is for that reason, as well as because of the record of the tremendous years that have passed, that I ask the House to accept this Motion and to transmit its greetings to the Assembleacute;e Nationale on this notable and auspicious day.

3.41 p.m.

Professor Sir Douglas Savory: I beg to second the Motion.
I consider it a very great honour to be allowed to second this Motion. I was in Paris at the time of the visit of His Majesty King Edward VII in 1903. We have recently had a very graphic description given us of that visit by Sir Frederick Ponsonby, who said that on the first day, when King Edward arrived at the Station in the Bois de Boulogne and proceeded in procession down the Champs Elyseacute;es, his reception was very cold. Sir Frederick was himself taking part; he was an equerry and was in full scarlet uniform, and, following the end of the procession, he was the victim of some of the cries of the mob—"Vive Marchland," "Vivent les Boers," "Vive Fashoda" and, more surprising than anything else, "Vive Jeanne d'Arc."
Sir Frederick describes in his wonderful style the amazing transformation brought about in three days by the King's visit. This was due very largely to the very remarkable speech which he made at the Hotel de Ville. The English translation is surely a very striking tribute to France, when he said that he felt at home in Paris, but the original French conveys much more graphically the message, if I may be allowed to read one sentence:
 Je n'oublierai jamais ma visite à votre charmante ville, et je puis vous assurer que c'est avec le plus grand plaisiir que je reviens à Paris, ou je me trouve toujours comme si jétais chez moi.
That very remarkable visit was carried out largely in opposition to the fears of the British Cabinet and even the representations made by the British Ambassador. That visit transformed the whole situation and laid the foundations for the Entente Cordiale in the following year.
Now, what was that Entente Cordiale? We are often inclined to forget today that it was not a treaty of alliance. It consisted simply of three agreements. The first agreement related to that very thorny question, the question of the French shore. What was the French shore? It was the right which the French had for exclusive fishing on the western coasts of Newfoundland. It was an ancient and historic right which went back to the Treaty of Utrecht in 1713, was confirmed by the Treaty of Paris in 1763 and again re-affirmed by the Treaty of Versailles in 1783. The French therefore had every possible right on this thorny question, and, as the Foreign Secretary knows, it gave rise to endless disputes, but it was settled in a very natural way. The French received compensation by an indemnity and also by a rectification of the frontier between the British and French Colonies in West Africa.
Then, again, Lord Cromer tells us in his memoirs how difficult his position was made for him by the continued opposition of the French in Egypt. This question, again, was amicably settled. The French agreed that they would not hamper the actions of the British in Egypt—and the beautiful French word was "ne pas entraver." The British agreed that they would allow the French to watch over tranquillity in Morocco—a very beautiful and most tactful expression.
Thirdly, the two Powers recognised their respective zones of influence in Siam, and these questions being completely put out of the way prepared the great alliance which led to the amazing victory after so many unfortunate defeats in the first Great War.
Perhaps the most touching episode in that great victory was the entry of the French troops into Alsace-Lorraine. The dear old ladies took out from the family chest the French flag where it had lain there for more than 40 years. We had a marvellous series of descriptions of that triumphant entry of France into Alsace and Lorraine by that very great and distinguished French writer, Maurice Barrès.
As far as the preparation for the Second World War is concerned, we had nothing with which to reproach ourselves. There was the Treaty of Guarantees, which is so often confused with the Treaty of Versailles but which was entirely distinct and separate from it. It was the guarantee of the French frontiers. That guarantee was unanimously ratified by both Houses of the British Parliament. It is true that there was a preamble which said that it would not come into force unless it was also ratified by the Senate of the United States. It never came before the Senate; it was rejected by the Foreign Affairs Committee. Consequently, the treaty was a dead letter. I think it is important to state that here, in view of the attacks which have been made upon us in a certain section of the foreign Press. Those are the facts, and in his great book "La Paix," M. André Tardieu does us the honour of fully recognising that we had done our duty in every respect.
As for the terrible disaster to French arms in the second Great War, I cannot help thinking that if only the offer conveyed by the Prime Minister, in the name of the whole Cabinet, to bring about French union had been accepted, things would have been very different. I know that the Prime Minister modestly disclaims the exclusive authorship of that document. It was composite. All the different members of the Cabinet had contributed towards it. But when one reads it and when one is familiar with the writings of that great historian, the Prime Minister, the style of the master is unmistakable, and we are perfectly

certain that his hand was the master hand which polished it. May I read a sentence from that wonderful document?
At this most fateful moment in the history of the modern world the Governments of the United Kingdom and French Republic make this declaration of indissoluble union and unyielding resolution in their common defence of justice and freedom against subjection to a system which reduces mankind to a life of robots and slaves. The two Governments declare that France and Great Britain shall no longer be two nations but one Franco-British Union. Every citizen of France will enjoy immediately citizenship of Great Britain. Every British subject will become a citizen of France.
Then came the wonderful conclusion:
The Union will concentrate its full energy against the power of the enemy, no matter where the battle may be, and thus we shall conquer.
The prophecy contained in that wonderful document was fulfilled.
The mover of this Motion has pointed out the wonderful reception given to the Prime Minister and the British troops in Paris in 1944. Fortunately, the late Lord Norwich lived long enough to give us a beautiful account of that welcome. He also told us of the efforts made in 1947 by the late right hon. Ernest Bevin and the French Minister M. Bidault to bring about the Treaty of Dunkirk which was, unlike the Entente Cordiale, a treaty of alliance, and was developed in 1948 into the Brussels Treaty by including Belgium, Holland and Luxembourg. One year later, it was again enlarged by the North Atlantic Treaty, to which the United States, Canada, Denmark and Norway, and even Turkey and Greece, adhered, making a grand total of 14 States.
I was delighted to find a clause in that Treaty which insists upon the importance of cultural relations, by which I understand the study of the French language and literature. I have never met an Englishman who knew any French at all who was not an admirer of French prose. I admit that the appreciation of French verse requires a certain amount of initiation. I have always held that the acid test was a realization of the beauties of Racine. Once that has been acquired, the whole of French literature is opened up. We must thank again our French Ambassador for bringing over to us last May the Comédie Francaise with its marvellous performance of Racine's "Britannicus." One could not hear it without becoming speechless with emotion. Here


was one of the great masterpieces of French literature, a work of absolute perfection, whether one considers the drama, the psychology, the arrangement of the scenes and acts and their continuous flow towards the dénouement, or the superb versification. It is an amazing French literary masterpiece, at least equal to the works of Sophocles or Euripides.
I cannot help thinking that that effort of the French Ambassador in bringing to London the Comédie FranÇaise did a very great deal to cement the Entente Cordiale in this country. While paying this tribute of admiration to French literature, I can only conclude by saying, "Vive la France! Vive l'Entente Cordiale!"

3.56 p.m.

The Secretary of State for Foreign Affairs (Mr. Anthony Eden): I rise to associate Her Majesty's Government and Members on this side of the House with the Motion which has been so happily proposed by the hon. Member for Coventry, North (Mr. Edelman) and seconded by my hon. Friend the Member for Antrim, South (Sir D. Savory), whom I congratulate on his return to robust health.
It is a remarkable fact, which my hon. Friend has well illustrated, that at the time when it was concluded the Entente Cordiale did not represent some great surge of opinion on either side of the Channel. It was, in fact, an instrument of political policy at the time, calculated to attempt to remove the differences which had so long complicated Anglo-French relations in Egypt and Morocco. That was the foundation of the business, which I suppose some people, using language which at one time was popular, would call a form of power politics deal.
However it began, its character over the years has entirely changed, and it is now important not because of the Treaty, not because of the arrangements which my hon. Friend has described to us and some of which I had myself forgotten, but because it is an expression of friendship which has come to mean something truly important to the men and women in both countries, Britain and France.
Since the war, as has been truly stated, we have tried to enshrine our relation-

ship again in a number of documents like the Treaty of Dunkirk, but I do not think that they really count for so much in the relations between Britain and France as the fact that the two peoples accept, as something which nobody can ever destroy, their deep feelings of friendship and comradeship, whether the weather be foul or fine.
There is only one other comment I would like to make. It is always difficult to express one's sentiments towards any country without either exaggeration or seeming cold. I remember at this moment a particular incident in 1940 when I went with my right hon. Friend the Prime Minister to Tours at a very bad moment in our fortunes and those of France. As we came flying back we had, for reasons into which I need not enter now, to fly very low, almost hedge-hopping over the French countryside. As we did so, I could not help the thought coming to my mind—we knew well what the immediate military future held— "Will I ever see France again?" Thinking it over since, I am sure that what was in my mind was not the physical features, like the French countryside, beautiful as it is, and all its lovely cities and cathedrals, or even one's French friends; but when we think of France we think of something which is bigger than any of us. It is a fact that France in her own peculiar way expresses to the world the epitome of Western civilisation as we know it. Whatever her problems, internal or external, she holds to that faith. We feel that when we are together the results for both of us are better and that we have each something to contribute to the common effort.
So, looking back on these 50 years, and forward to the work we have still to do together, I should like to endorse what has been said, and I should like to mention two French statesmen of this post-war period, M. Robert Schuman and M. Georges Bidault, both of whom have proved themselves not only great Frenchmen but great Europeans. In that tradition of the Entente we will go on to work together. Much has been said of the common losses on the battlefield, but now there is another very difficult kind of work to do for peace, and our two countries have to do it now in the terms and spirit of this Motion.

4.1 p.m.

Mr. C. R. Attlee: I rise to support, on behalf of my hon. Friends, the Motion which was moved and seconded so admirably and eloquently by the two hon. Gentlemen. I am more or less of the same generation as the hon. Member for Antrim, South (Sir D. Savory), and I was reminded by the names that came into his rolling periods of the time when relations were extremely bad with France and when foolish people talked about the French being our natural enemies. I remember that at the time we talked mainly about the Dreyfus case and the French talked about the South African war, and we abused each other.
Then there came a change and the building up of the Entente Cordiale. Looking back 50 years, it is worth recalling that the Foreign Secretary of that tune, Lord Lansdowne, was partly French and partly British, and I think he was one of the main architects of this change. I remember that we used then to attribute very great importance to these matters of friction—the Grand Banks Fisheries, the Sudan, and West and East Africa. They all seemed so vital. There seemed to be endless squabbles, but when once the will to agree came they could be settled, and I think that is a lesson to statesmen at the present time. It is so easy to exaggerate the small difficulties and not realise that what is needed is the will to end a quarrel.
I would say one word about our contacts with France. We enjoy French art and literature, but above all, as the right hon. Gentleman has rightly stressed, personal friendships; and I would recall one of this kind with an individual, a very great Frenchman, Leon Blum, a man who in himself epitomises French culture. He was a man who showed the greatest courage in the face of his enemies and strove to unite Frenchmen in those difficult times after the war, and he was a true friend of this country. We on this side believe in the sentiments expressed in this Motion, that French and British may for many many years work together for the good of both and the peace of the world.

4.5 p.m.

Mr. Clement Davies: While I agree with what has been said by the Foreign Secretary as to the origin

of the Entente Cordiale, nevertheless the signing of the three Agreements between France and this country on 8th April, 1904, set the seal upon a new understanding and a new relationship between the two countries, which have brought, and continue to bring, a rich harvest of mutual benefit to both peoples. Therefore, it is a memorable date in the history of Europe and of the world. It marked the end not merely of recent rivalries but of centuries of bitter rivalry between the two countries, traces of which may be found on scores of battlefields throughout the continent of Europe. It marked the beginning of a remarkable partnership which has grown even closer, stronger and more fruitful throughout the ensuing years.
This partnership is vital for the security of freedom, not only the freedom of the peoples of France and of Britain, but the freedom of man throughout the world. It has stood the test of time and survived the challenge of adversity, and when we look back over the intervening period and recall the tumultuous events and titanic struggles that have torn and convulsed the civilised world, we cannot but wonder at the resilience, the extraordinary resilience, and tenacity of that partnership which has enabled it to stand firm against so many shocks and storms and through so many disasters and vicissitudes.
This partnership is based upon common interests and common objectives. It is embedded in our allegiance to common ideals and common institutions. It is fortified by an awareness of common dangers and common sources of security. We can speak, with justifiable pride, of the debt that Europe owes to Britain, especially for the heroic part she played as saviour and liberator of Europe. But we shall ever remember that Europe and indeed the world owe an immeasurable debt to France for the colossal sacrifice she made in her immortal resistance to German aggression. In the course of that agonising conflict of the 1914–18 war, France lost over 2 million men. The flower of her youth was destroyed. This was a shattering blow to the strength and vitality of the great French nation from which she has not yet been able to recover.
Notwithstanding the immense problems and difficulties, both external and internal, with which she has been confronted since 1945, France has taken the initiative


again and again in the endeavour to lead the nations of Europe out of the dark abyss into which they were plunged by the horror and ruin of war. When the great ideal of a united Europe is accomplished, the historians of the future will acknowledge that it was due primarily to the efforts and achievements of France.
So for 50 years France and Britain have been allies. Their sons have fought and fallen side by side in defence of their lands and freedom. The bonds of friendship and understanding that bind them together are unbreakable. They were forged out of tempered steel by the hammer of necessity on the anvil of history. A partnership so formed and founded is indestructible. It has endured for half a century, and therefore we earnestly hope that it will continue to be with us for ever.

4.9 p.m.

Miss Jennie Lee: I wish to associate myself unreservedly with the Motion to be sent by this House to our neighbouring democracy of France. Although I have the honour to represent an English constituency, I belong by birth and upbringing north of the Border and for me to talk about the Entente Cordiale is a very new thing. It is more natural for me to think in terms of the "Auld Alliance"; to think of the generations when Scotland looked towards France as our closest friend and ally, and indeed depended on the friendship and support of France when we had to deal with the English. I do not wish to take up the time of the House with the romantic history of Scotland, nor even to follow the hon. Member for Antrim, South (Sir D. Savory) in the tribute which he has so well paid to French literature and much else which we owe to France.
I did not, like the hon. Gentleman, have the privilege of going to France in 1903, but I was there about three weeks ago, and I was deeply moved, meeting distinguished French men and French women of all political parties who had one thing in common—they all had a distinguished record during the war-time military Resistance in France.
This is not an occasion for party politics. I am presuming to intervene at this moment because I believe that a democracy, whether it is French or

British, is in grave danger of being overlaid by the dictatorship Powers. These are always so much tidier than a democracy; there is only one point of view, only one voice. It is easy to mock France on occasions, as it is to mock this country, when there are many discordant voices. I deeply believe, however, that if the world is to recover sanity, if we are to avoid the very real dangers of a third world war, it is France and Britain, and France and Britain together, who must be the deciding voice in making the right decisions for the world.
I was very much struck in France a few weeks ago by how sensitive French people are to our opinion, our many opinions, for, like France, we have different opinions. In Paris, I discussed not only current affairs, not only war-time friendships, but events going back to the years before the war. I am glad that my right hon. Friend the Leader of the Opposition paid special tribute to M. Leon Blum, because countries, like individuals, sometimes make their best effort not when they win but when they are defeated. The France of the pre-war days, under the leadership of M. Blum, was, I believe, more truly democratic than our own country. I believe that if we had accepted the advice of France in the early days of the Spanish Civil War we might, before we faced the full might of Nazi Germany and world Facism, have turned world history in another direction.
I hope and pray that from this time of anxious eager discussion among French men and French women wise decisions will result, and that together we may build not just on past friendships but on long years of future friendships. Even though we talk with many voices, there is an independence and power in democracies that can stand up for genuine democratic rights. We must not allow our countries to be bullied by any other countries or once more to make the tragic concessions to Fascism which we made before the Second World War.

Question put, and agreed to, nemine contradicente.

Resolved,
That this House, in recognition of the fact that this year marks the fiftieth anniversary of the founding of the Entente Cordiale and that for the past half-century the close and friendly relations thus established between France and Great Britain have been loyally maintained


and of great mutual value both in war and peace; that Franco-British friendship—of which the Dunkirk Treaty of Alliance and Mutual Assistance is a recent manifestation—is one of the foundation stones on which the post-war policies of France and Great Britain have been built, and is essential for the security and prosperity of Western civilisation; and that it is the common desire of the peoples of our two countries that this close understanding, which has so well withstood the test of time, should be preserved and diligently developed, hereby resolves that a Message of Greeting and Good Will should be conveyed to the Assemble Nationale to mark the first fifty years of the Entente Cordiale and to give an assurance that the tradition of Anglo-French solidarity which has grown up during this period will continue to be a constant and guiding principle of our foreign policy over future decades.

Mr. Speaker: I shall have pleasure in conveying to the President of the National Assembly of France the Resolution of the House.

Hon. Members: Hear, hear.

Orders of the Day — WAYS AND MEANS

Considered in Committee [Progress, 7th April.]

[Sir CHARLES MACANDREW in the Chair]

Question again proposed,

AMENDMENT OF LAW

That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance, so, however, that this resolution shall not extend to giving any relief from purchase tax otherwise than by making the same provision for chargeable goods of whatever description or by reducing any of the several rates of the tax generally for all goods to which that rate applies.

Orders of the Day — BUDGET PROPOSALS

The Chairman: Mr. Maudling.

Mr. Harmar Nicholls: On a point of order. I understood that as I had the Floor when the debate was adjourned at 10 o'clock last night I should, under the usual convention, be called to continue my speech.

The Chairman: The hon. Member was certainly making a speech when 10 p.m. struck, but the debate was not adjourned. We adjourn the debate only when we are in the House. Last night Progress was reported and that carries no courtesy rights for the hon. Member to speak now. I will say to the hon. Member that if he is in his place he shall be called later to-day, but not now.

Mr. Nicholls: Further to that point of order. I was on my feet before Progress was reported. I understand that in the Budget debate last year, when the hon. Member for Wallsend (Mr. McKay) was interrupted in similar circumstances, he continued his speech the next day. I only press the point now because it is one of the rights of back benchers, and I think we ought to hang on to our rights as much as possible.

The Chairman: If the right hon. Gentleman will refer to page 427 of Erskine May, he will see:
Precedence on resuming an adjourned debate.—On resuming an adjourned debate, the Member who moved its adjournment is, by courtesy, entitled to speak first on the resumption of the debate: but for that purpose he must rise in his place in order to avail himself of his privilege.…


But that applies only to an adjourned debate. This is not an adjourned debate; in Committee we report Progress. In an ordinary debate a Member is entitled to speak once only; in Committee, one can speak as often as one is called. I will call the hon. Member later in the day, but not now.

Mr. Nicholls: I beg your pardon, Sir Charles, for pursuing the matter, but I would refer you to the OFFICIAL REPORT of 14th April, 1953, c. 158. In precisely the same circumstances as existed last night, the hon. Member for Wallsend held the Floor at 10 o'clock, and he pursued his speech the next day without any question. May I ask in what way has the Ruling which existed last year, or your Ruling upon the circumstances last year, been altered?

The Chairman: The circumstances have altered precisely to this extent, that my eye has been caught by Mr. Maudling.

Mr. R. J. Mellish: Further to that point of order. At the conclusion of the debate yesterday, the hon. Member for Peterborough (Mr. Nicholls) made references to the speech which I had made earlier, and said that I had referred to the Chancellor of the Exchequer as "Grab" Butler. I should like to put it on record that that was not correct. I referred to the right hon. Gentleman as "Drab" Butler.

4.18 p.m.

The Economic Secretary to the Treasury (Mr. R. Maudling): The debate yesterday was concentrated on one or two particular aspects either of this year's, or more often, of last year's Budget. Perhaps it will be convenient to the Committee if I deal with one or two of the broader economic aspects that lie behind the Budget. Before doing that, however, I should like to say a few things about the Budget and the comments thereon of the right hon. Member for Leeds, South (Mr. Gaitskell).
I think it would be right for me to start by disclosing what might be considered to be a personal interest. I do grow a small quantity of chicory. However, I hasten to add that I do so on a strictly non-commercial basis. I consume more than I grow, so that I am

a net consumer and am not, I think, affected by my right hon. Friend's announcement.
The right hon. Member for Leeds, South is extraordinarily difficult to please. If my right hon. Friend had produced a great increase of taxation, he would no doubt have said that the economy must have gone badly wrong for things to have been allowed to get into that state. When my right hon. Friend last year produced great decreases of taxation, the right hon. Gentleman said, "What a bad state of affairs we must be in if you have to reduce taxation." This year when he does neither, and therefore apparently the economy is in balance, still the right hon. Gentleman is not satisfied. It is difficult to know what one should do.
The fact is that the 1952 Budget of my right hon. Friend was designed to deal with a difficult position on the balance of payments which he had inherited from the right hon. Gentleman. The 1953 Budget was designed to start a process of re-expansion of our economy which had not to be accompanied by inflation or overseas balance of payments crises. That was a process that my right hon. Friend at the time made clear would take some years to work out and, as the Committee was well aware, the effects of last year's Budget upon the Revenue were not to be felt immediately but would have been felt hereafter.
The fact that this year no changes of any substantial character, either upwards or downwards, are proposed seems to indicate that in fact the level of activity in the economy is just about right compared with the capacity of the economy. The fact that no large changes are made shows that neither is there an inflationary situation which leads to increases in taxation nor is there undue slack in the economy which calls for a large reduction in taxation.
I turn to the point which the right hon. Gentleman tried to make that the people generally had been led by Government statements and the Economic Survey, and by Press accounts, to expect very large reductions of taxation in this Budget. I do not know what papers the right hon. Gentleman reads, but there was a headline in "The Times" which said:
Little room for manoeuvre.


The "Manchester Guardian" said:
Budget not expected to allow rise in total consumption.
The "Daily Telegraph" said:
Budget barometer points to little change.
The "Economist" was almost embarrassingly accurate on the subject of the Budget. I do not know what papers the right hon. Gentleman draws his information from—

Mr. Hugh Gaitskell: From the hon. Gentleman's speeches.

Mr. Maudling: I hope that my speeches are singularly in accord with the wise remarks of the newspapers. What did the right hon. Gentleman the Member for Leeds, South say about last year's performance in the economy?

Mr. Ivor Owen Thomas (The Wrekin): As the hon. Gentleman has referred to comments in the Press, it would not be inappropriate to call attention to a short quotation from the leading article in the "Evening Standard" yesterday which said:
There can be but one reaction to Mr. Butler's Budget. Utter disappointment. The people have been buoyed up in expectation of bright and cheerful tidings. They were eager and excited at the thought that at last there might be some alleviation of the tax burden. And they had every reason to be expectant.
Their hopes were dashed.

Mr. Maudling: Precisely. We now know which newspaper the hon. Member reads, but I do not suspect the right hon. Gentleman of doing the same.
The right hon. Gentleman's main criticism of last year's economic performance was that we did not apply the gain we made on the terms of trade either to an improvement in the balance of payments or to increasing investment. I think that he repeated that argument again on the wireless last night. I should like to deal with it, because it is certainly far from accurate.
First, take the question of the terms of trade. It is certainly true that we gained considerable advantage from the further improvement in the terms of trade. That is, of course, clearly recognised in the Economic Survey; but I would say to the right hon. Gentleman that it just is not true to say that the change in terms of trade has no relation

whatever to the policy of the Government.
Does he seriously argue that our attitude to the International Wheat Agreement has had no effect on the price of wheat? We are criticised for opening commodity markets and getting away from discrimination against dollar goods. One of the main reasons is to avoid the premium prices that we were having to pay for raw materials when there was this discrimination.
It is equally true that while the effect of the terms of trade upon imports can be quantified, and is quantified, in the Survey, we cannot estimate in figures the effect of the terms of trade on exports. It is equally true that the sort of world in which prices of raw materials are falling is the sort of world in which prospects for British exports are getting more difficult. Anyone who has tried to sell in countries which produce cotton knows precisely what that means.
On the question of the balance of payments, the right hon. Gentleman is always a little critical of us for appearing, as he says, to produce a rather misleading impression of what really are the facts. He is always a little cross with us for including figures of defence aid. It would be rather distorting the comparison between one year and another if we excluded defence aid and at the same time included the whole of the defence burden on the economy internally and externally.
What the right hon. Gentleman did not refer to was the question of stocks. Last year he was rather cross with me about stocks. He suggested that we did not say enough about stocks. He tried to argue that we were distorting the facts of the balance of payments because stocks had gone down. The right hon. Gentleman made no reference to stocks for the very good reason that stocks in total last year increased by £170 million and stocks of imported commodities increased by £90 million. That surely is very relevant to his own argument of last year.
It is also untrue to say that the improvement in the terms of trade was not used to improve our balance of payments, last year. The improvement in the terms of trade undoubtedly enabled us to import a great deal more in 1953 than we had done in 1952. In 1952 we were reduced to a low level of imports which


it was quite impossible to continue. We were reduced to that level of imports because we had to impose cuts to get over the balance of payments crisis which would not have been anything like as heavy if the right hon. Gentleman had imposed them himself while he was in office, as he could have done.
The fact is that in 1953 there was a big increase in long-term investment from this country. There was also a substantial increase in the gold reserve. The increase in the gold reserve was paralleled by an almost equivalent increase in short-term sterling liabilities. The conclusion to be drawn is that there is much still to be done. The conclusion that is not to be drawn is that there was no progress. The progress last year was very much greater than the progress in 1951. Then we were going forward; in 1951 we were moving backwards.
The next point is what happened to investment in this country in 1953. 1 should like to say a few words about the figure for personal savings. That appears in the Survey in Table 9 and it has caused a good deal of interest. The figure used to be called "Personal saving" and it is now called "Balance, including personal saving." The point is that the figure of £928 million is a balancing or residual figure. It should be made clear that this figure is liable to a very wide margin of error indeed.
What is quite clear is that there was an upturn in personal and private savings last year and the year before. It would be unwise to try to give an exact measurement. What is clear—and it is apparent from independent evidence of life insurance, national savings and so on—is that there has been a substantial increase in personal and private savings which obviously flows from the different taxation and monetary policy of the present Government.
It is also important to bear in mind that these savings which took place in 1953 are not something now available for investment. They were counter balanced by the reduction in the Government surplus and the change from external dis-saving to external saving. The volume of personal savings which we achieved in 1953 is in no way a measure of the amount of additional investment

which could have taken place, which is determined only by the amount of additional capacity that there was available in the investment goods industries last year.
The right hon. Gentleman tried to draw a considerable distinction between investment in the public and private sectors of industry, and said that investment in public industry increased and that in private industry did not. There is one important factor which he overlooks, and that is that throughout the financial year 1952–53 there were no initial allowances. In his own Budget of 1951 he deliberately withdrew the initial allowances with the express purpose of restraining investment in 1952–53. He must have under-estimated the effect of his own policies. It was not until the Budget of 1953 that initial allowances were restored. It is not possible to bring new factories and machinery into being overnight as a result of the restoration of the allowances. It takes time.
What has been taking place during 1953 is a considerable increase in the number of approvals for new factory buildings. There was an increase of 50 per cent. in the last half of 1953 over the level of the last half of 1952. Moreover, the flow of new orders to the capital goods industries, which was falling in the first part of last year, has started to move up again. There has been a definite improvement in 1953.
But, of course, it is equally true that that improvement has not gone far enough, particularly in comparison with our industrial competitors abroad. So far as I can calculate from the figures that I have been able to obtain, the load of taxation upon British industry is still definitely heavier than taxation on either German or American industry, and we all know what the Germans have recently been doing about the taxation of their industry. If we are to hold our own in world markets, clearly we must take account of these facts. We must recognise that, so long as British industry is carrying this comparatively high burden, it is going to be difficult to compete with our overseas competitors.
What is holding back investment in productive industry? As the right hon. Gentleman pointed out, the Economic Survey said that it is not shortage of


cash in total which is holding back investment. I think that is true. The liquid position of companies as a whole has considerably improved in the last two years, which is necessary after the very difficult situation in 1951, when the liquid position deteriorated very seriously. But what is true in total of companies is certainly not true in every case. While many companies have better cash resources than they had, there are many industries where shortage of liquid cash is still a deterrent to further productive effort.
Over and above that, it is clear that what weighs in the minds of people who have to invest money in industry is whether the net return on their investment after taxation is adequate to justify the risk of investment. That is surely a fundamental economic feature of investment, and that is one of the main factors which is keeping investment below the level to which we want to see it rise.
Therefore, in considering his Budget, my right hon. Friend sought for a means of further relief which, in the first place, would be tied directly to new industrial investment, and secondly would not in the initial stages put any noticeable additional burden on the Revenue. In the first few years this investment allowance will add very little at all to the burden on the Revenue. Moreover, if as we believe, the new allowance will succeed in stimulating a great deal of new investment, that investment will provide additional taxable capacity in industry. If it works, the scheme will to a considerable extent pay for itself out of the expansion which will take place.
Therefore, the investment allowance meets two problems which my right hon. Friend is facing of how to give a further stimulus to industrial expansion without risking a return to inflation, and without giving away too rapidly further purchasing power.
This has been referred to as a subsidy. I cannot see that the investment allowance is any more a subsidy to industry than the life assurance allowance is to life assurance, or the non-distribution relief is to non-distribution. If an allowance is given to only one part of industry, one part will be subsidising the other. If the allowance were given to export industry, clearly it would be a subsidy to exports. But when the allowance goes to reduce the total burden of taxation on all industry,

that reduction being effected by an allowance for productive industry, I do not see how it can be called a subsidy.
I think it was Plato who said that it can be described as a pleasure when one stops banging one's head against a wall, but it is a strange form of pleasure. Similarly, this is a strange form of subsidy. If a modern highway robber should take away the clothes of the right hon. Member for Leeds, South, and then give him back his shirt, he would be warmer than if he had lost all his clothes, but he would not be subsidised.
The main question which the right hon. Gentleman did not face in his speech was: Was my right hon. Friend right to aim at a balance in his Budget above the line? I got the impression that the right hon. Gentleman thought that he was. He said, for example:
The fact is that the pressure of demand is there, and it is only if one gets a rapid rise in revenue from high productivity over and above commitments that there is room to make any substantial concession."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 37]
But he complained about the absence of figures and of estimates of what was going to happen to the economy each year. I do not think there has ever been a time when the public have been so deluged with economic statistics and information as they are at the present time. The latter part of the Economic Survey gives a clear indication of the way in which the Government saw our economy developing in the course of 1954. So clear was it that many leading journals, including the "Economist," seemed to draw from it a remarkably accurate deduction.
What the right hon. Gentleman was trying to complain about was that this forward look to the pressures within the economy in 1954 did not contain any detailed statistics. I will give the right hon. Gentleman a good reason why it did not. He used to put those statistics in himself. They were completely wrong in most cases. Take his own Budget for 1951. There were two crucial figures in his Budget speech. He estimated the change in the Overseas surplus as a reduction of £200 million. The actual out-turn was £685 million.

Mr. Gaitskell: The figure was £300 million.

Mr. Maudling: I have been given these figures by well-informed people on the subject. If I am wrong, I am open to correction. Perhaps the right hon. Gentleman prefers this figure. His estimate of the change in gross domestic investment, which is of great importance, was plus £30 million for the financial year. The Economic Survey put it at £138 million, and the actual out-turn was £1,109 million—an error of something over 3,000 per cent. There is a danger in putting too many statistics into one's forecast.

Mr. Douglas Jay: According to the hon. Gentleman's own Economic Survey this year on page 9, the deficit on the U.K. balance of payments in 1951 was £380 million, not £600 million.

Mr. Maudling: That is the figure with which I was furnished. I will check it.

Mr. Gaitskell: With the same people who made the estimate?

Mr. Maudling: That is an important point that the right hon. Gentleman is making. I hope he is not blaming the statisticians. What I am complaining about is that he is trying to place on statistics produced by most able and competent people a standard of accuracy which is incapable of attainment.

Mr. Gaitskell: In fairness to the admirable officials who advise the Chancellor I should just say that everybody agrees that it is extremely difficult to make accurate estimates of these various factors. In 1951, with the very disturbed state of world trade, it was particularly difficult. Nevertheless, I think the Chancellor and successive Chancellors should try to give the House and the country the benefit of their estimates and take a chance on it.

Mr. Maudling: I agree very much with the right hon. Gentleman. My right hon. Friend will always try to give as much statistical information as he thinks will be of value, but it is his opinion that statistics which involve an error of more than 3,000 per cent. are liable to do more harm than good.

Mr. Roy Jenkins: Will the hon. Gentleman say whether he thinks his right hon. Friend's Budget estimate for last year was of value?

Mr. Maudling: My right hon. Friend's Budget estimate for last year was of more value than any others which have been made in the House for the last 10 years. Leaving aside the statistics, the question is whether it was right of my right hon. Friend to decide that he should not have a deficit below the line this year. On this subject the hon. Member for Gloucestershire, South (Mr. Crosland) made some very interesting remarks last night. His general conclusion appeared to be that the Chancellor should have budgeted for a deficit above the line this year in order to release more purchasing power. That is clearly an argument which can be made, but I would tell the hon. Member that, at the present moment, the economy is working practically full out. There is very little slack. There is probably some capacity for improvement in investment industries, but there is very little slack. Unemployment figures are remarkably low.
We are still facing the big problem of expenditure; we are undoubtedly facing growing competition of a very serious kind from Germany and Japan, and the danger of allowing the drag from the home market to work against exports is very considerable. We are not yet certain what will be the trend of the American economy over the next six months. In those circumstances, I should have thought the case for adopting a prudent line in making this decision was overwhelming. It is arguable; but for those reasons, and considering the outlook for the next six or 12 months, it would have been wrong for my right hon. Friend to take a chance of a fall in exports which would be the effect on our overseas balance of such a budgetary decision.
I am not sure what the right hon. Gentleman means when he says that the pressure of demand is already there. In a pre-Budget article in the "Daily Herald," he said that there was too much of the grasshopper and too little of the ant about the record last year. The grasshopper was the creature who sang, "The world owes me a living." Coming from the right hon. Gentleman who left us with one of the biggest deficits in external finance that this country has had in a generation, his quotation about the grasshopper is a bit much.
He wants it both ways. He says that we are allowing too much consumption, which is dangerous, and also that we should allow more consumption, because it is desirable. Yesterday he even hinted that we should further reduce expenditure. That argument comes from a party pledged to hundreds of millions of pounds' expenditure if it were returned to power. That is the very interesting thing about the right hon. Gentleman. People who are incapable of making up their own minds are like the mugwump bird, which sits with its mug on one side of the fence and its wump on the other. The right hon. Gentleman seems to be trying to have both on the same side of the fence.
It is clear that he is bound by the statements contained in his party's policy documents, which involve very large additional commitments on the Exchequer. I do not know if he has yet worked out what would be the repercussions upon our economy of this new level of expenditure. His right hon. Friend the Member for Dundee, West (Mr. Strachey), in a very interesting article in the "New Statesman," showed quite clearly that in order to carry out this policy there would have to be a move back towards more controls and regulations.
That is certainly a sustainable point of view, but it is in complete and growing contrast to the policy pursued by Her Majesty's present Government, which is one of freedom and expansion. I do not think it would be unfair to describe the policy of the Labour Administration as one of maintaining a high level of activity by keeping up the pressure of money demand by heavy Government expenditure. That is an easy monetary policy. The right hon. Member for Bishop Auckland (Mr. Dalton) once described it, in a very poetic phrase, as "lubricating the economy with a sufficiency of purchasing power." It may have been necessary, but it was nearly disastrous. The excess of purchasing power was; kept in check by higher taxation and physical and fiscal controls at home and abroad.
That policy had many advantages. It was an easier one for the Government to carry out. It provided manufacturers and producers with more markets and profits, as a result of which they could keep a small proportion of those profits.

It was also useful to the Government in the short-term. It appeared to provide more assurance of a high level of employment. This type of economy may be satisfactory or effective for a land-locked economy, like an East European country, or a small, tightly-controlled economy, which does not depend upon world trade. But the trade of this country was founded on freedom. British trade is as wide as the oceans and as varied as their currents and tides.
It has been proved more and more in practice that a controlled and regulated economy—a rigid and high-cost economy—will not stand up to the fluctuations of international trade and payments. It is all very well for the right hon. Gentleman to say, "Look what happened when we were in power. There was a rising level of production." Yes, at the expense of recurring balance of payment crises. That is a very different matter.

Mr. Anthony Crosland: This is all quite amusing, sub-intellectual stuff, but will the hon. Member address himself, at some stage in his speech, to the fact that in contrast to what he is now saying two crucial things in 1953 were at a lower level than in 1951—exports and investments? If he would say a word about those two, it would be gratefully received by hon. Members on this side of the Committee.

Mr. Maudling: I am afraid that my speech must have been cast at a lower intellectual level than that of the hon. Member. He has not understood a word I have been saying. A rigid, high-cost economy, of the type which the right hon. Gentleman was pursuing, would not have been able to bear the increased defence burden which we have to bear at the present moment, in the face of a recession of American trade as large as it was in 1949.
Another change that has taken place is that we have now moved away from consumer rationing over a very wide range of products, and we shall complete that process as rapidly as we can. It will not be set in reverse by any subsequent Government. I suggest to hon. Members opposite that we cannot combine in one and the same economy the State purchase of imports and consumer freedom of purchase in the shops. If any attempt is made to do that it will be disastrous for our finances.
In the last few years we have made a wide move away from controlled and directed trade, towards a liberalised and freer trade. As trade has become freer, so have payments and the control of payments. I am certain that if a subsequent Labour Administration attempted to return to a controlled and tightly insulated economy, such as that which they tried to organise in the late 1940s, the result would be disastrous. The only alternative is a policy of expansion and confidence. It must be recognised that the £ sterling has value only in so far as its value can be realised by its holder. No amount of control will maintain its value if it has no intrinsic worth. To wrap it up in the cotton wool of controls and restrictions is more liable to weaken than strengthen it as a currency.
As a trading nation, it is important that we should import foodstuffs and raw materials and export machinery. That means that our imports are more essential to us than our exports are to the people who buy them. When world trade is restricted, manufactured goods tend to be restricted before foodstuffs and raw materials. For that reason, and because our economic and banking systems provide the wheels upon which so much of the world's trade runs, it is essential to pursue a policy of expanding trade and to remove the barriers to freedom.

Mr. Harold Wilson: Will the hon. Gentleman say a little more about the American recession? Does not he recognise that, in the past few months, the American recession has had none of the effects on the outside world or this country which the 1951 recession had, for reasons peculiar to America, as the hon. Gentleman knows. If he is priding himself on the maintenance of our balance of payments figures and our gold and dollar reserves during the past few months despite the beginnings of an American recession, will he not also recognise that those gold and dollar reserves have been maintained almost entirely with Red gold? Will he not admit that?

Mr. Maudling: I should certainly admit that if it had any relation to the truth.

Mr. Wilson: But what about the figures?

Mr. Maudling: Detailed figures are not given and never have been given of the transactions of the Exchange Equalisation Account. However, I can assure the right hon. Gentleman, what I know he will be glad to know, that the strength of sterling, which has been remarkable in the last few weeks, is only to a very minor extent related to the purchase of gold from Russia. It is almost entirely due to the strength of sterling in normal commercial usage.
I should like to develop a little more this question of our payments policy, and of what is the right policy for sterling now in the conditions we are having to face of more competition and freer trade and freer payments. All sterling that is available to people outside the sterling area must be redeemed either in goods or in gold. There is no alternative. The difference between a hard currency area and a soft currency area is this. In a soft currency area it is easier to sell goods, or it is possible to postpone payment by the obtaining of temporary credit. However, in the end the sterling available in the world has to be redeemed by British goods or British gold.
The position has changed in recent years in the European countries in the E.P.U. From our point of view the position of the European currencies is nearly as hard as that of the dollar itself. We are already in a fairly high gold trance in our deficit with the Union. The E.P.U. and the dollar areas are close to being gold areas. Apart from countries with a chronic shortage of sterling, like Japan, at the moment, we find ourselves, or shall find ourselves very shortly, up against a gold liability. Therefore we must not over estimate the possibility of switching from what used to be considered hard currency areas to what used to be considered soft currency areas, because the position has very much changed in recent years.
Another fact that we must bear in mind is that we cannot force people to hold sterling. If they do not want to hold sterling and want to buy elsewhere in other markets—and there are very few goods we have to sell that are not obtainable elsewhere—they will do so. People will only hold sterling if they want to, and our position depends on the willingness of people to accept and hold our currency. They will hold sterling only if they


can see a use for it in this country or elsewhere, or feel confident that it will retain its value over a period so that it will enable them to obtain goods.
Therefore, it is most important that we should widen the use of sterling and make it quite clear that we ourselves have confidence in sterling, because if we give the impression by imposing unnecessary controls that we have no confidence in it we shall weaken our position. Our defence is in its strength. That is why my right hon. Friend has in recent months reopened the gold market and unified the various types of transferable sterling, as a step forward and a means of increasing the extent to which other countries will hold sterling and use it.
As to the question of unifying the various forms of sterling, the effect will be different in various countries. I think the hon. Gentleman the Member for Gloucestershire, South referred yesterday to the shortage of sterling in some countries and to that making it difficult to export. This extension of transferability will make it easier to promote exports and will make a contribution to better export prospects.
The same is true of the reopening of the commodity markets. People can buy dollar commodities for sterling, and some dollar commodities are now freely available for consumption in this country—for instance, wheat. The expansion of the oil industry is another example. All these are examples of how we must constantly extend the use of sterling because that is the only way we can maintain its value. If we try to stop people from transferring sterling they will say, "Let us get out of this. They are trying to keep it here. There must be something wrong with it." We can see the beneficial effects of this policy from the effect on the unofficial rates of transferable and security sterling, which, for the first time for a very long time, are within the official rate margins.
Far from imposing controls, we should remove restrictions on our economy to facilitate the flow of trade, and we have to try to do this in the dollar area, for example. It would be to the general benefit of all concerned if more things were enabled to flow over the tariff walls into the dollar markets. We have liberalized our purchases of grains, metals, and so on in the dollar area

because by doing so we help our economy and help to create markets for our goods in those countries. That is most important.
In Europe we have pursued a bold policy, that the right hon. Gentleman also, I think rightly, pursued in 1951, of European liberalisation. In 1952 we lost a very great deal of gold to Europe. We lost the best part of £100 million worth of gold, and we have an outstanding debt with E.P.U. of some £200 million. We did deliberalise in 1952. We were forced to deliberalise to safeguard our balance of payments. In 1953 we came under very great pressure of persuasion from other members of O.E.E.C. to reliberalise and get back to the 75 per cent. We went back to 75 per cent., and now we are at 80 per cent. We took considerable risks, and it is most important that other European countries should recognise that. We made it clear at the time, when undertaking this burden, that we were taxing our strength as far as we reasonably could.
We have put forward a new proposal relating to the outstanding debt with E.P.U. We have this outstanding debt, and it has been outstanding a long time. It has always been understood that these credits afforded by the Union should be short-term credits, and, therefore, it has been said to us that we should do something about repaying some of this outstanding debt of £200 million. The Union has run into some difficulties because circumstances have changed. Liberalisation between the E.P.U. countries has imposed a strain on the Union which I do not think was envisaged when it was founded. The credits the Union gives which enable trade to flow have been nearly exhausted. There is very little left, and there are strong reasons for trying to readjust the arrangements if we are to carry on E.P.U. for another year, and it is most important certainly for our economy that it should be carried on another year. The position is that we must make some repayment of this debt, to reinstitute credit, and also because it has been outstanding for some time. It is true that in the long run it has to be paid in gold anyway. The provisions of E.P.U. say that on dissolution of the Union debts are to be in gold.
The obligation in this situation is on the creditor countries. We consider that


the countries that have reached a creditor position in the Union are obliged to do something about it by way of further measures of liberalisation, as we ourselves did in our time. That is the first thing.
We have said also that we would like to enter into consultations with the four main creditors with a view to considering schemes for funding some of the outstanding debt immediately and also for extending the period of repayment of the debt from the present three years when the Union comes to be dissolved.
We have said that if these conditions are fulfilled—if the first condition of good creditor policies on behalf of the creditors is pursued and if we can come to satisfactory agreements on these matters—we are prepared to make a payment of £30 million sterling in respect of our debt to the Union. But I must make it clear that these proposals all hang together. We think they are the best that we can put forward not only in justice to ourselves but also—and this is most important—for the benefit of the Union, and I hope they will be accepted.

Mr. Gaitskell: May I put two points to the hon. Gentleman? I am obliged to him for telling us a little about these proposals. First, surely he is not correct in saying that these debts have to be paid in gold anyway. Clearly, they could be paid in goods and simply adjusted in the ordinary way, as was always envisaged at the inception of the scheme. The hon. Gentleman may wish to correct any misleading impression which he may have given.
Second, in making these proposals, are the Government also suggesting that the present arrangements as regards gold and credit should continue for seven years? Should they be, say, more liberalised or tightened up, or should any change what ever be made in that direction?

Mr. Maudling: I am obliged to the right hon. Gentleman. In trying to compress my remarks, perhaps I did not make myself perfectly clear. It is true that the original conception was that repayment should be through trade, but with the emergence of a persistent creditor position it is unlikely that that will be possible within even an extended time; but such debts as are not repaid through trade will have to be paid in gold

on the dissolution of the Union. In his second point, the right hon. Gentleman was talking about hardening the various tranches within the Union arrangement. We are not prepared to agree to this.
So far as the rest of the non-sterling area is concerned, the Committee will be aware of our efforts to expand trade with Japan, and particularly the efforts made by my right hon. Friend to expand trade in peaceful goods with countries on the other side of the Iron Curtain.
There remains the question of our trade with the Commonwealth, which I mention last but which is, of course, easily the most important. One of the main purposes of the Commonwealth Conferences has been to expand trade within the sterling area by expanding development within the sterling area and enabling this country to return to its traditional position as a major exporter of capital to the sterling area. One of the most satisfactory results of 1953 was the increase in the movement and flow of capital from this country for the development of the resources of the Commonwealth and the sterling area.
So far as the G.A.T.T. is concerned, as my hon. Friends will have seen, it was agreed at the last Conference that before the forthcoming review of the G.A.T.T. takes place, there will be consultations among the Commonwealth countries as to the line we should take. But if we are pursuing a policy of expanding trade, we must carefully think out all its implications. What is clear is that what is likely to do most harm to this country's trade are quantitative restrictions.
One can to some extent deal with tariffs by being more efficient and selling more cheaply and vigorously to overcome them; but no amount of efficiency will overcome quantitative restrictions. It is because G.A.T.T. is very much directed to removing quantitative restrictions that we must recognise that its provisions have a great deal of benefit to this country, although we certainly consider that in many ways they could be improved.
What underlies our policy in all these matters is the fundamental belief that if we want to sell, we must buy; and we cannot expect other people to agree to our imposing barriers on things coming into this country if at the same time we expect them to give us a completely free


entry for our goods. There has to be reciprocity and a quid pro quo in these matters—as my right hon. Friend the Secretary of State for the Colonies on one occasion irreverently said, "Thirty-bob pro quo if you can get it."
The logical conclusion to be drawn from this line of argument, both on trade and on payments, is that it will not be complete until the £ sterling is once again a convertible currency. It cannot play its full rôle as an international currency, conveying half the world's trade, until such time as it is convertible. As the Committee are aware, my right hon. Friend and the Government have been pressing on, by further relaxation of controls and by further freeing of the economy, in the direction of restoring the convertibility of sterling, which remains a cardinal object of our policy and a unanimously agreed object of policy among all the Finance Ministers of the Commonwealth. We in this country have done a great deal to advance the convertibility of sterling, which will help not only us but also world trade. We look for support, assistance and co-operation from other countries in achieving an objective which will be to the mutual benefit of all.
What has been the result of this policy so far? We have been pursuing a policy of more freedom, less controls and expanding trade, and basing the strength of sterling on its real intrinsic value and not on controls and artificial restrictions. One of the best indications of the results we have achieved so far is the strength that sterling has maintained during the period of the United States recession. The right hon. Member for Huyton referred to this.
Of course, there are differences between the present movement in the United States and previous movements. The index of production has fallen about the same amount as in 1949, but possibly it has fallen slightly more swiftly. The outflow of American dollars on defence now is greater than it was then. There has been a remarkable stability both in Stock Ex-change prices and, more important for us, in commodity prices.
It must be remembered also, however, that we ourselves are now carrying a defence burden much heavier than a few years ago. That makes our position in these matters much more difficult. No one can say with certainty what will be

the developments in the United States economy. My right hon. Friend devoted a considerable portion of his Budget speech to analysing the position there. Whatever happens in the future, we take considerable comfort from the fact that now, some eight or nine months after the start of the United States recession, sterling is still immensely strong and our reserves are still good. This seems, at any rate, to be some evidence of the efficacy of our policy.
The problem for this country in the future is undoubtedly how to make our industries competitive. Competition is growing all the time, and principally price competition. I should, perhaps, say a word about export credits, to which my right hon. Friend referred. As the right hon. Member for Leeds, South said, often there have been reports to the effect that British manufacturers were losing orders because they could not grant credit as extensive as their Continental competitors could grant. These complaints can be exaggerated. It is quite possible that our overseas customers are anxious to play us off against other countries by saying, for example, "Look what the Germans are doing," "See what the Dutch are-doing." What is clear from the close study that I have tried to make of this subject is that credit facilities available in the City to London are second to none in Europe. Certainly, on the question of the cost of credit and rates of interest, we compare very favourably with most other countries.

Sir Walter Fletcher: Is not one of the great difficulties, which, I hope, the Treasury will deal with, that when they go to the Export Credits Guarantee Department they have to do a block insurance for a whole series of transactions, and not only the one in which they are interested at the time? If this could be made more flexible, it would certainly assist great institutions.

Mr. Maudling: My hon. Friend, a great authority in insurance, will appreciate the difficulties of the selection of risks, from the point of view of the insurer, but I should not like to deal in detail with these matters, which are more the province of my right hon. Friend the President of the Board of Trade. The complaint that is made by manufacturers is not that they cannot borrow the money, but that they cannot afford to carry on


their own balance sheets the cost of borrowing. In other words, the raising of credits by a manufacturer involves a load on his balance sheet which he should not be asked to carry.
It has been said also that manufacturers are not sufficiently certain that they will be able to obtain the credit they want. We are proposing arrangements to extend the system of unconditional guarantees by the Export Credits Guarantee Department to the banks, which will go a long way to meet both these difficulties. This extension must be subject to a limit, because, clearly, we do not want to open the way too rapidly to an extra burden on our balance of payments by giving too great a degree of credit, and the possible effect on the internal monetary situation might be considerable. For one thing, therefore, this new form of cover will be confined to the period after the acceptance of goods by the customer—the period before will be covered as at present—and in the first instance the amount of credit available will be up to a maximum of 85 per cent. of the value of the goods concerned. I told the right hon. Gentleman that I would give him a short explanation of that matter.
Leaving aside these questions of credit, export incentives or anything else, it is basically true that competition is the thing that matters to us. There are no sellers markets now for this country, and no controls or regulations will save us if we are not going to be competitive. I am quite certain the right policy is the policy which recognises that we must go out for freedom, expansion and enterprise. It may be said that we are taking risks in this policy. Of course, we are. As we are poised on the pinnacle of trade, there is no policy for us which does not take risks. To seek safety in poor and ineffective controls is not the remedy because they cannot be effective and they must eventually lead to disaster. We believe that to face the risk of expansion is to continue in the tradition that made this country great.

5.11 p.m.

Mr. Hugh Dalton: The Economic Secretary to the Treasury has made a very long and interesting speech. According to the division of labour practised on these benches, my right hon. Friend the Member for Huyton

(Mr. H. Wilson) will deal with a number of the issues that the hon. Gentleman has raised, because I have it in mind to revert to some important matters mentioned by the Chancellor in his Budget statement.
In that statement two things were said which have caused me and very many other people, including hon. Members in all parts of the Committee, deep concern. The first is that the Government have taken a glance at the old people and many others who are poor and needy, have assured them that they have them very much in mind, and then passed by on the other side. On that I shall comment further in a moment. In my view, it was not necessary at all to leave all these people out, even on the assumption that the Budget this year should be roughly in balance above the line; but I will make a proposal in a moment, and I hope the Chancellor has not yet closed his mind to changes in the Budget for this year.
The second matter which has caused many of us concern, and, indeed, on which the Economic Secretary touched, was the very disappointing and unsatisfactory record of new investment in the private sector—not the public sector—of industry. On those two points I will now make a few observations.
First of all, the old-age pensioners, the widows and the disabled ex-Service men will get nothing out of this Budget. There is also another class whom we are apt to forget in the competition of who shall be first in the queue. I refer to large families containing a number of young children. On those families the high price of foodstuffs bears more heavily than it does on any other sector of the community, even though it presses heavily on many others. There is a danger sometimes to forget the young children in large families because they have no vote.
I am not propounding a new official policy, but I am wondering, which is permissible even in such a debate as this, whether in a perfect democracy each child should not have a proxy vote, to be exercised by one of its parents—one vote for one human being. That might do something to equalise the electoral pressures which develop sometimes. However, that is a thought for the next time, when we may be giving constitutional matters further consideration.

Sir W. Fletcher: Sir W. Fletcher rose—

Mr. Dalton: I am not going to give way on that. I have only thrown out a thought, and the hon. Gentleman is entitled to chew it up.
All these groups are left now with nothing more, and the Chancellor says he has no money for any of them. I am going to put a proposal to him whereby he could find a reasonable sum for this purpose. If he were to restore the Profits Tax to the level at which it stood before he reduced it in order to make room for the Excess Profits Levy, which is now passing away, he could very well find the necessary funds. The reason why Profits Tax was reduced was—so it was said at the time—that the Government were introducing the Excess Profits Levy. We are very glad that that Levy is now passing away. I think nearly everyone who spoke on that subject from this side of the Committee, as well as many others on the other side of the Committee, disliked that Levy. I denounced it in strong language. I said it was a disincentive demagogic device. Now that it has passed away we are all delighted.
But, looking back, this E.P.L. was given as the excuse for reducing the Profits Tax, and I should like to ask the right hon. Gentleman to consider whether it would not be an appropriate readjustment now to put the Profits Tax back to where it would have stood had he not reduced it in his first Budget. What would that mean? I am not going to give many figures, but I will give a few. As the Chancellor knows, these figures are a little tricky because the basis of computation has changed. Whereas when we were in office the Profits Tax was a deduction for Income Tax purposes, that is not so now, and we must be careful to compare like with like.
I have taken the trouble to have the figures checked, and I think the position is as follows. The present Profits Tax is 2½ per cent. on all profits plus 20 per cent. on distributed profits; that is, 2½per cent. on undistributed profits and 22½ per cent. on distributed profits. When the Chancellor of the Exchequer came to power he inherited from my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) a Profits Tax of 10 per cent. on all profits plus 40 per cent. on distributed profits; in other words, 10 per

cent. on undistributed profits and 50 per cent. on distributed profits.
I do not think I will be required to go through the intermediate details of the arithmetic, but I hope the Committee will take my assurance that the figures are correct, and that I have had them checked. We have to make an allowance for Income Tax at 9s. in the £ in order to make the transformation from the rates as they were under my right hon. Friend when the Profits Tax was a deduction for Income Tax purposes. Comparable rates would be 5½ per cent. on undistributed profits plus 22 per cent. on distributed profits, or 5½per cent. on undistributed profits and 27½ per cent. on distributed profits.
What I am asking the right hon. Gentleman to do, in order to restore the status quo, is to put up the present rate on undistributed profits by 3 per cent. from 2½per cent. to 5½ per cent., and the rate on distributed profits by 5 per cent. from 22½ per cent. to 27½ per cent. If those figures are not right, there is time for them to be corrected before the Chancellor replies to the debate on Monday night.
I am submitting that, if that were done, the Chancellor would get enough revenue to help those whom I enumerated a little while ago. I should be grateful—and I think this is a reasonable request to make—whether I have persuaded the right hon. Gentleman to do this or not, if he would tell us how much additional revenue he would get if this were done. My own estimate, made from outside the Treasury, is that he would get at least £50 million and possibly nearer £100 million a year. I would like to have the right hon. Gentleman's own estimate of that. He is estimating that the coming year will give him £172 million in Profits Tax plus E.P.T. In this total E.P.T. is negligible, so it is nearly all Profits Tax. On this basis, I estimate roughly that he would get between £50 and £100 million extra. It is not tolerable to say that we cannot do anything for the old people, the widows, the large families or the disabled ex-Service men, when it would be so easy to do it merely by reversing a step taken, in quite different conditions, two years ago. So much for that.
Now may I take the question of new investment. The position here is disturbing, and the "Economic Survey" sets out


the facts clearly. I think I am breaking no Privy Councillor's oath when I say that the Economic Survey is prepared by officials and is afterwards considered by Ministers, and that sometimes in the course of the latter process revisions are made, some of which do not falsify the facts but make them appear in the form in which the Ministers would prefer the truth to be stated.

The Chancellor of the Exchequer (Mr. R. A. Botler): How can the right hon. Gentleman tell that the process has not been completely reversed under this Administration?

Mr. Dalton: Anyone may guess when the figures are noted and conclusions are drawn from them. Now I turn to pages 22 and 23, which deal with fixed investment. In the first part of paragraph 42 I seem to see the triumphant pen of the Minister of Housing and Local Government. He has written something in with a greater emphasis than the original draft contained. He has cock-a-hooped a little about his triumph in the Cabinet over the housing programme, and over the Chancellor of the Exchequer. It is explained in that paragraph that, although the year has been a poor show on the whole, it has been redeemed from total failure partly by the housing campaign of the Minister of Housing and Local Government and partly—this is where they could not edit away the civil servants completely—by the general success of the public sector.
Now I will quote a few words to illustrate:
The outstanding change in fixed investment in 1953 was the further large increase in housebuilding.
That is true and I shall not diverge into discussions about the housing record, beyond saying that it has been achieved by stripping away the labour force from repairing houses, and by not building any new hospitals, and by building very few new schools. Subject to all that, however, the right hon. Gentleman has done quite well. Anyhow, this is the first triumphant cry in the fixed investment paragraph, but the thoughtful reader also adds the qualifications that I have given. Reading on we find:
Expenditure by industry on new building was slightly higher in real terms than in 1952. The increase was mainly concentrated in the

fuel and power industries; there does not appear to have been any corresponding rise in new building work done for private manufacturing industry.…
That is a grave confession. Let it be noted that I am quoting, not picking and choosing. I could have left out this next sentence, if I were not as honest as I am—
… but this was running at a higher level at the end of 1953 than at the beginning, following the relaxation of licensing restrictions in the spring.
That is all right—
Similarly with plant and machinery there were increases in 1953 in investment in the basic industries"—
All nationalised—
particularly coal and electricity, but no increase in manufacturing industry.
The more one reads—and I shall read more—the clearer the truth shines through these passages showing—here I am not jesting—a disconcerting contrast between what is happening in the public sector and what is happening in the private sector.

Mr. Cyril Osborne: Would the right hon. Gentleman correlate what he has said with the last sentence on page 24 and will he read that sentence?

Mr. Dalton: I am coming to that, but at this stage I say that, even having gone so far in citing these rather disconcerting statements, it is much more than the most doctrinaire Socialist could have hoped to get so soon, this advertisement for the success of the public over the private sector. Now I will read on, as the hon. Member for Louth (Mr. Osborne) wishes. This next sentence I want the hon. Gentleman to explain when he catches your eye, Mr. Bowles—
Apart from housing, the main increases between the two years were in mining"—
nationalised—
electricity"—
nationalised—
gas?—
nationalised—
and water"—
largely municipalised—
rail transport"—
still nationalised—
and telephone services.
nationalised for a long time. So this merit list is wholly in the public sector.


Next comes an exception to the general picture of misery—
Investment in shipping rose considerably as a result of a fall in sales abroad of secondhand ships.
We welcome that. But—
the amount of money spent on fixed investment by manufacturing industries is estimated to have been about the same in both years.
I shall not read any more.

Mr. Osborne: Keep your promise.

Mr. Dalton: What more does the hon. Gentleman want?

Mr. Osborne: The last sentence at the foot of the next page, and for the right hon. Gentleman to correlate that with the money invested in the mining industry.

Mr. Dalton: You will realise, Mr. Bowles, that in the paper concocted by so many skilled hands and brains there cannot be anything in this next sentence in conflict with what I have read already, but if the hon. Gentleman wants me to read the sentence at the foot of the page—
During 1952, according to revised estimates, there was little change in the total volume of stocks and work in progress.

Mr. Osborne: Read it on the next page.

Mr. Dalton: I have read the last sentence of this page, which was what the hon. Gentleman wanted. If he wants any more he must read it himself later. I have read enough to show that this is a damning story. Here is hard, statistical, factual evidence in support of the superiority of planned public service over unplanned private profit seeking In short, it is a crashing argument for more Socialism. I think that stands out a mile from this Survey. I had no hope that we should get so soon and so complete a confirmation of what we have been urging for many years.

Mr. H. Nicholls: I think it is a fair point, as the right hon. Member is announcing these figures with glee, to say that no one has ever denied that nationalised industries know how to spend money. We doubt whether they can earn it as well as private enterprise.

Mr. Dalton: I hope that the distinction is not too subtle, but we are discussing not expenditure but fixed investment

as described by Her Majesty's Government. I think the hon. Member for Peterborough (Mr. H. Nicholls) had better go back and buck up some form of private enterprise in which he is interested. In the public sector there is a complete absence of the inducements which are held to be necessary to get the private sector to do its duty. In the public sector, which is doing so well, there are no increased dividends, no bonus shares, no initial allowances and there will be no investment allowance.

Squadron Leader A. E. Cooper: And no tax.

Mr. Dalton: On the contrary, they pay tax and they will pay more Profits Tax still under the proposal I have been making. In the public sector there are none of these inducements, but there are men with a pride in their job, who are getting on with their job, in spite of Tory Ministers and the Tory Press. This contrast stands out as one of the most remarkable facts in the present economic situation.
We must agree that something is required. I am told that the term, "a shot in the arm" is rather out-moded, but a shot in some other part of the body is certainly needed to get private enterprise to buck up and do more investing in the light of these facts. No doubt we shall discuss these matters at considerable length during the Committee stage of the Bill in connection with the investment allowance, initial allowances and so on. We will keep an open mind as to which of these various devices may be the more serviceable for this medical operation and we shall not go into the Committee stage with our minds set against any of the proposals made under this head by the Chancellor in his Budget Statement. We should like to see them set out in Clauses of the Finance Bill.
I shall try to average with the Economic Secretary so that half the total length of our two speeches will not be thought, by back benchers on either side of the Committee, to have been too long. I wish to conclude by referring to another matter with which the Chancellor dealt in his Budget Statement when he referred to Estate Duty reliefs, particularly for private companies. As no doubt he will be replying to this and other points on Monday, I should like to


ask if I correctly understand what is proposed. He referred to the question of the valuation on the assets basis of the property of certain deceased people. Everyone who has been in the Treasury, or near the Treasury, or taking any interest in these matters, is very familiar with the long controversy which has gone on about Section 55 of the Finance Act, 1940. No doubt we shall deal with this subject in detail in the Committee stage. For my part, subject to looking at the drafting of the Clauses and so on, the first of the proposals of the right hon. Gentleman seems not unreasonable.
The right hon. Gentleman said:
my proposal here, in broad terms, is that the Estate Duty valuation of the shares actually sold shall be brought into line with the sale price."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 223.]
That is to say, if the valuation of the assets for Estate Duty had been different from and, as very often is alleged to be the case, very much higher than the value realised on the sale of shares.
But when we come to the second proposal, I must say that I think it an extraordinary one. I should like the right hon. Gentleman to give a little detail about this when he speaks on Monday—I think I am not alone in seeking information—and say how far this proposal is to reach for giving a reduction of 45 per cent. of Estate Duty in a certain range of cases. Does this apply to all private businesses, or does it apply only to some sub-group of private businesses which are vaguely decribed as "family businesses"?
I was not surprised to see that "The Times" criticised the proposal of the Chancellor and said that it was creating a new privileged class which could not be justified over such a wide range as "The Times" understood the Chancellor to intend. I therefore ask the right hon. Gentleman what the range is and for a rather closer definition. Even if the range were relatively narrow, in my view it would still be open to very grave objection. I hold in my hand a report with which the Chancellor and his colleagues must be very familiar. It was issued in July, 1951, and is called:
ESTATED DUTY AND FAMILY BUSINESSES REPORT ON STATISTICAL INVESTIGATION BY THE BOARD OF INLAND REVENUE.

I hope that everyone here will have a look at this Report before we debate the matter in Committee. This is a most crushing rejections—by competent officials who know what they are talking about and have studied the question for many years—of any suggestion that this claim has anything in it at all. I find it very odd that only three years later the Government should be acting against the published evidence of their own expert advisers on this subject. Everyone who has to pay Death Duties thinks up reasons why he ought not to do so. Every year reasons are advanced why certain people should be let off lightly or altogether. The plea for the family business, which sounds rather snug and benevolent, naturally attracts emotional support, particularly among people who think that they can work themselves into the category. When confronted by this, the cold brains and dispassionate judgment of the officials concerned, who serve the right hon. Gentleman and served me and intermediate Chancellors—

Sir W. Fletcher: And were overruled.

Mr. Dalton: —they look at it and say, "It is all very well for people to get up in the House of Commons and make speeches and for you to get pathetic letters, but really there is nothing in this." The officials have examined a number of cases and taken a wide sample of the cases affected. This report is not a long paper; anyone can read it in 10 minutes, and I urge them to do so. I take only two points from it. They say that, taking a sample, there were less than 2 per cent. of private businesses considered in which it was not possible to pay the whole of the duty due from non-trade assets, without trenching upon trade assets at all. They give further figures to show that, even if one trenched on trade assets, that need only be done to a very small extent. Finally, they say:
The fact that some recourse may be necessary to the business assets to pay the duty does not necessarily mean that the business is broken up on the death of the deceased.
That is the sad story that is always told.
In some cases shares may be issued to the public and this may indeed be done on terms which leave the control in the hands of the family; part of the deceased's shareholding may be sold; it may be possible to raise a loan from the company itself; or in the case of an individual business or partnership the business may have sufficient liquid reserves out of which the duty could be paid.


The final sentence reads:
Nevertheless the general picture which is presented is clear enough; in this connection it is worth noting that the public discussion has not so far resulted in the production, to either the Chancellor of the Exchequer or the Board, of any cases in which a business has in fact been broken up by the operation of the Death Duties.
What is the answer to that? That is what Ministers have to answer. I do not wish to use violent language; it would be quite out of character with the atmosphere this afternoon. But I think that, were it not so quiet this afternoon, some people might be tempted to say that this was a "ramp." I am not saying so, but people might easily be tempted to say it. This is one point out of many on which we shall expect rather more information from the Chancellor, both as to exactly what is intended, and, for heaven's sake, why?

5.41 p.m.

Mr. Harmar Nicholls: There are two eventful days in the House of Commons so far as debates are concerned. One is the Gracious Speech and the other the Budget. But there is a subtle difference between the two. On the occasion of the Gracious Speech, the practice is to rehearse a speech in the constituency during the Recess and then bring it to Parliament; whereas on the occasion of the Budget we find hon. Members rehearsing their speeches on the Floor of the House and then taking them to their constituencies at the following week-end. The result is that the speeches are all individualistic and, as we saw yesterday, they are contradictory. This debate so far has been no exception.
First, we found that the experiment of hon. Members opposite was to see if they could kill the Budget by thinking up some attractive slogans. The merits of the Budget itself have not really been assailed. We had a sort of slogan conflict—

Mr. M. Follick: Chicory, chicory dock.

Mr. Nicholls: First, it was called the "chicory Budget." I think that has now been dropped and the reason is that a reference to chicory leads one to think of chicken-feed and we remember that last time the expression "chicken-feed" was used by the right hon. Member for

Ebbw Vale (Mr. Bevan) about the housing policy of the then Government it was followed by his own crashing failure to provide houses, taking into account the then demand.
Then it was suggested that it was a dull Budget. This was followed by a Labour ex-Chancellor of the Exchequer suggesting that my right hon. Friend the Chancellor of the Exchequer had said that he apologised for not having thrills in it. A good Budget does not want any thrills, he said; in other words, a good Budget is a dull Budget, which completes the circle. Then we had other descriptions. It was called a "skinflint Budget" and a "drab Budget" and I am sorry to say that I thought I heard the hon. Member for Bermondsey (Mr. Mellish) describe it as a "grab" Budget. All these speeches have made no attempts at all to deal with the merits of the Budget. They were merely rehearsals—[Interruption.]I am trying to disclose the weakness of these speeches. They have merely been rehearsals, and the hon. Members who made them have contradicted one another.
My right hon. Friend was charged with creating great optimism before the Budget was presented, with building up people and then dropping them down, as one hon. Member said, on the backs of their necks, because he had not met the demands for extra pensions. The hon. Member for Gloucestershire, South (Mr. Crosland) explained clearly that anyone who had read the Economic Survey would have known at once that there was no reason at all for wild optimism. When we remember that it was my right hon. Friend who issued the Economic Survey, I do not see how we can accuse him of creating optimism.

Mr. Charles Pannell: If that be true, why was it that the hon. Gentleman looked so miserable during the whole time the Chancellor was making his Budget speech?

Mr. Nicholls: That question might have given me an inferiority complex, because I thought my natural demeanor was happy. It would appear that while I was feeling satisfied, because the affairs of the country were in competent hands, my expression gave the wrong impression.
An ex-Chancellor of the Exchequer from the benches opposite put a serious point when he asked what was being done


to meet the German subsidy for competing industry. He suggested that nothing was being done or contemplated. The hon. Member for Wallsend (Mr. McKay), supported by the right hon. Member for Bishop Auckland (Mr. Dalton), suggested that the "improvement allowance" which is designed to help industry should be taken away.

Mr. Dalton: The only suggestion that I made which remotely resembles what the hon. Gentleman is putting into my mouth is that now that the Excess Profits Levy is to be repealed, the Profits Tax should be put back to where it was before the levy was introduced.

Mr. Nicholls: But the right hon. Gentleman quoted a figure. He said we should pass legislation to take another £100 million out of industry in Profits Tax. I wish to know how we can call on the Government to help resist the German subsidy for competing industries and give a shot in some part of the industrial body—I think that was the term the right hon. Gentleman used—and take away their profits and denigrate the help which will obviously be given to them by the "improvement allowance."

Mr. Dalton: The hon. Gentleman will appreciate that if you pay a Profits Tax so far as distributed profits are concerned, that comes out of profits which have already been distributed.

Mr. Nicholls: The right hon. Gentleman did not confine himself to distributed profits. He said that the undistributed profits ought to be given back by 10 per cent. He should not run away from the speech he made only a short while ago.

Mr. Dalton: The hon. Member can read it in HANSARD tomorrow.

Mr. Nicholls: The right hon. Gentleman made it perfectly clear that he wanted together to take £100 million both from undistributed and distributed profits. That was the point which he made, and I do not see how, on the one hand, his party can call for encouragement to home industry to meet German competition and at the same time impose that kind of burden. Indeed, from the speeches which have been made thus far, it looks as if the only argument which will leave this rehearsal to go to the country is that the

party opposite are the only people who wish to help the old-age pensioners, and the wicked, hard-faced Tories, as usual, do not want to help at all.
What the right hon. Gentleman is asking the Chancellor to consider is whether he will put help for the old-age pensioners before maintaining full employment. Clearly that is the choice at the moment. By putting extra taxation on the producing industries—that was the suggestion of the right hon. Gentleman—we are putting them in a weaker position to compete in the world markets at a time when we are on a razor-edge and the result of that will be unemployment. Confronted with the choice of providing now the extra help that old-age pensioners deserve, and paying for it by unemployment or resisting the provision of that help for a short time and maintaining full employment—and thus paying for all social services, including help for old-age pensioners—I should support the action of my right hon. Friend the Chancellor. I submit that if the suggestion which the right hon. Gentleman made with such aplomb and confidence whilst in Opposition were made to him when he had the responsibility of the Treasury, he would be the first to refuse it.

Mr. Dalton: As a matter of fact, I invented the Profits Tax, in its present form, when I was Chancellor of the Exchequer.

Mr. Nicholls: And it was the right hon. Gentleman's legislation which helped to place us in the present position in which we cannot afford these things.

Mr. Wilfred Fienburgh: Perhaps I may intervene while the hon. Gentleman is sorting out his notes. His point is that the £100 million which would be taken from industry would be cut from what they were devoting to industrial investment. In fact, the £100 million which was given to industry by the reduction in the Profits Tax was almost entirely dissipated by increased dividends to shareholders, so that what is proposed is the redistribution of the £100 million from the shareholders to the old-age pensioners.

Mr. Nicholls: If the hon. Gentleman had paid his right hon. Friend the compliment of listening to his speech, he would not have made that intervention, for it is no good the right hon. Gentle-


man trying to ride off on the suggestion that he was saying that this money should come only out of distributed profits. The right hon. Gentleman made it perfectly clear that he wanted extra taxes on undistributed profits, that he wanted extra taxes on the reserves which industries have to use in order to build their competing power.
I do not think hon. Members opposite understand the importance, the value and the strength of having good reserves in industry so that industry can keep itself modernised. I thought the right hon. Gentleman's suggestion was very significant and I want to make it perfectly clear that the choice which he is placing before the Chancellor is that of giving help to the old-age pensioners at the risk of creating unemployment. If that were put to the country, I know which the country would choose.
In my opinion, we should follow the pattern set by the Chancellor. He gave a sound and sober appraisal of the situation and is approaching it in a constructive and sensible way. I suggest that the help which we can all give as back benchers is to make use of our experience outside in order to offer some constructive suggestions to the Government. I want to do that in connection with one section of the Budget speech. As reported at column 210, the Chancellor said, speaking of social services:
The next large group is that of the social services. The provision here amounts to no less than £1,327 million—an increase of £63 million over the corresponding provision in the original Estimates for last year.… Housing subsidies account for £10 million, increasing from £70 million to £80 million. This illustrates the cost to the Exchequer of the success of the Government's housing policy."—[OFFICIAL REPORT, 6th April, 1954; Vol. 524, c. 210.]
We must maintain the building of houses at a high rate, for the need for houses on the scale at which we are building today is likely to exist for the next three or four years. We must build the houses. But we recognise that we have to face the financial consequences of building so many houses which carry a subsidy, and I suggest to my right hon. Friend that he should give very careful thought to the idea behind the Motion on the Order Paper, signed by some 50 of my hon. Friends and myself, suggesting that while he should maintain the rate of house building, he should use all

possible efforts to encourage house purchase not only in a general way but among those who, unless they purchase, will become subsidised tenants.
I raise the point now because I understand from what appear to be inspired reports in the Press that the Treasury, the Ministry of Housing and Local Government, local authorities and the building societies are meeting to see whether they can find some means of helping purchasers with the size of their deposits, and I understand that the suggestion being pursued is equivalent to the system in use before the war.
In those days houses of the sort which I have in mind cost roughly £500. The building societies would lend £400 of that money towards the purchase. We found that the number of prospective purchasers with £100 as a deposit were limited, and so builders entered into an arrangement with the building societies whereby the societies would lend £475 instead of £400, the extra £75 risk taken by the society being covered by the builder, who left a collateral security in a separate fund for the £75. The result was that houses could be sold to purchasers for a £25 deposit instead of a £100 deposit, and that helped in the purchase of houses.
I understand that those are the lines being pursued now. I welcome the present move, with these reservations. A house which cost £500 before the war would today cost £1,700. As a result, if we merely reduce the deposit by increasing the amount which a man can borrow, while we are helping prospective purchasers with their deposits we are also raising the cost of their repayments. Let me give an example. If a house costs £1,700, under normal purchasing arrangements the prospective purchaser has to find £400 deposit and, as a result, he borrows £1,300, the weekly repayments on which are 32s.
What I understand the new suggestion to be is that instead of lending only £1,300 on the security, the building society would lend £1,600 of the £1,700 purchase price. That would mean that the purchaser would get his house with a deposit of £100 instead of a deposit of £400. That would help him with his deposit, but if he is borrowing £1,600 instead of £1,300, his weekly repayments will be, not 32s., but £2 Is. That is over 25 years, which experience has shown is


as long a period as can conveniently be used.
As a consequence, under this suggestion, we may be helping the purchaser with his deposit, as we did with the collateral before the war, but we are also increasing his repayments. I suggest to my right hon. Friend that, while this scheme, as I understand it, would help house purchase, it would not help house purchase among that section of the people who are on the waiting list for subsidised houses. What we must do is to find a means of encouraging house purchase among that class of people—people who, unless they purchase houses, will be subsidy-carrying tenants.
The way in which that can be done is this: instead of giving the collateral security of £300, we could make it a grant of £300. The deposit then would be £100. The purchaser would still borrow only £1,300 and his repayments would be kept at the same level. In that way we should have helped with the deposit and also with the repayments, because we should have kept the repayments at a level which would enable people on the waiting list—the £8-a-week man and the £9-a-week man—to purchase.
Where would the £300 come from? Accepting that there are something like 50,000 people on the waiting list for houses who would be interested, that would be asking the Chancellor to pay 50,000 times £300. The £300 would be going in place of a council house, which now carries a subsidy of £26 16s. from the Treasury and £8 16s. from the local authority, in each case £35 12s. for 60 years. We are committed to those payments for 60 years. I suggest that the payment of that £300 be made from National Savings to assist house purchase in lieu of subsidised rent. This would be repaid by the subsidy figure being paid back to the National Savings fund. To repay £300, plus accumulated interest on £35 12s., would take 13 years instead of 60, so the Treasury would be in exactly the same position as it is now, except that, instead of being committed for 60 years, it would be committed for only 13.
Nevertheless, if the scheme is to work, we must have the wholehearted and enthusiastic co-operation of the local authorities. If they are to co-operate, we

must help them to face their problems, one of the gravest of which is rising rates, because of the expense to which the local authorities are increasingly put. We could say to them. "By encouraging the people on your housing list to buy houses instead of being subsidised tenants, you would make it possible for us to help you with money." That would encourage them to join in.
Let us say to the local authorities, "For every purchaser instead of a tenant on your list, we will allow you to forgo your £8 18s. subsidy, to which at the moment you are committed for 60 years. We will relieve you of that contribution, and the Treasury will repay the £300."
If the local authorities were given that relief, the repayment of the Treasury grant would then take 18 years instead of the 60 years to which the Treasury are now committed under the subsidy scheme. [Interruption.]I am trying to make a constructive suggestion to save money in order to give it to the old-age pensioners. My suggestion would be an encouragement to people to purchase their houses, it would help the Treasury, which would be committed for 18 years instead of 60, and it would help the local authorities because they would be relieved of their housing contribution altogether. It would also help National Savings. It has been found that one way to make Savings effective is to connect them with some national event. My scheme would give an extra impetus towards getting money into National Savings.
I hope that the Economic Secretary to the Treasury will give some thought to this scheme, which would relieve the Chancellor of his apprehensions by saving money for him. It would help the local authorities and the National Savings Movement, and would bring to many more people the responsibility and joy that go with owning the house in which one lives. My proposal would do so many good things at once that it is well worth considering.
I think that I have spoken for far longer than I intended, but constructive suggestions such as I have put forward ought to come from the back benches. I do not know whether hon. Gentlemen who have been interrupting me are the sub- or the super-intellectuals, but both of them are much too ready with academic


arguments and are not sufficiently in touch with practical day-to-day business. They must not be disdainful of practical suggestions, which are more likely to do good to the country than some of the highfalutin discussions that we sometimes have.

6.5 p.m.

Mr. Cyril Bence: We have heard a very interesting suggestion about house purchase from the hon. Member for Peterborough (Mr. H. Nicholls). If he lived in an industrial borough, he would find only a very small percentage of people on the housing register able to take advantage of it and purchase houses. The result of putting his scheme into operation would be that a large number of people would hand in applications to buy houses from the local authorities, which would subtract from the available houses and make it impossible for the remainder of the people on the housing list to get them.

Mr. H. Nicholls: There are at the moment 240,000 subsidised houses. Under my suggestion, there would still be 240,000 houses built, and they would be occupied by the same people, who, instead of being subsidised tenants, would be house purchasers. I should expect to see the number of subsidised tenants fall by the same number as grants to houses were taken up.

Mr. Bence: The hon. Member must remember that he cannot grind today's corn with the water that passed through the mill yesterday. He is suggesting that the local authorities should forgo subsidy for the houses, and that the money be granted to house purchasers. Yet he says that the local authorities would keep on building the same number of houses. If they received subsidy for the same number of houses, there would be nothing to give to the house purchasers.
I want to take up this continued cry that to tax distributed profits is to tax industry. What an awful lot of nonsense. It is not a tax on industry but a tax upon rewards obtained by individuals who have the power to live on the efforts of industry. Investors and shareholders are always striving to make certain that the income with which they are left after taxation shall be the same, whatever the level of taxation. I have been in industry nearly all my life. I know that Income

Tax is directed at those who draw incomes out of manufacturing industry. It is not a tax upon industry itself. It is time that that sort of nonsense was dropped.
I have been interested to read some of the speeches from the Government benches on Government expenditure. I remember that we had a debate in 1950, when harsh criticisms were leveled at the Government of the day. I shall not use the vicious and vitriolic language used by the right hon. and gallant Member for Leicester, South-East (Captain Water-house) to my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) when he was Chancellor of the Exchequer about the absurd waste in Government Departments. He had a whole list of places where he suggested there was waste.
I have taken the trouble to check that list. The right hon. Member for Blackburn, West (Mr. Assheton) was very gentle in his criticism of the present Chancellor of the Exchequer; in checking up this list I found one or two items on which the right hon. Gentleman made a most bitter attack. One was about expenditure on war histories. He said that we were then spending £92,000 a year on war histories. The present Chancellor is spending £104,000 a year upon them. The right hon. Gentleman talked about the expenses of the Cabinet Office and chided my right hon. Friend that they were costing £176,000 a year. Under the present Government they cost £193,000 a year. Those are just two examples out of a long list.
The right hon. Member for Blackburn, West yesterday said that the Chancellor of the Exchequer lacked the machinery to have control over Government expenditure. I should like to give a personal view about this. For many years I worked for a firm whose greatest plum in trading activities was that of Government contracts. They were the swings on which that firm made up for what it lost on the roundabouts. For many years it considered the profits made on these contracts as making up for what was lost by bad estimating in other directions.
That was in a much more competitive period than that which Government Departments now face. Today they are met with monopoly prices in every field. In the building trade and subsidiary trades


which supply materials for the building industry buyers of Government Departments are met by these monopolies and rings. There is a statement in one Report of the Public Accounts Committee from Portsmouth Dockyard, a Government institution, implying that its cost for the conversion of a warship of a similar type was much cheaper than that of a private contractor. Government contracts are a paradise, a milch cow to be exploited, and they have been as fair game to industry as the railways are to those who wish to travel for nothing.
It is time we looked at how much is wasted in the Departments and how much Departments of State are—and I do not like to use this word—"blackmailed" by large contractors in Great Britain. Today there are no competitive prices and no competition whatever. I remember that there were 20 other firms making the same articles, as were made by the firm for which I worked, but eventually we were the only manufacturer in Great Britain which had big Government contracts, and when we were large Government contractors in 1936 our product was twice the price that it was in 1921.
As I said earlier, our finest plum was Government contracts, and it is that sort of thing that ought to be inquired into. It would be wise for the Chancellor of the Exchequer to make an investigation of the firms in this country—and I do not want to mention any names, although I could do so—which are contracting with Government Departments and exploiting them to make fabulous profits. It is no good hon. Gentlemen shaking their heads. I have worked for such firms as an engineer.
There is a proposal in the Budget for an investment allowance to industry. I am an engineer by profession, and any one in that profession knows that capital investment in engineering plant goes on day by day. I could mention modern engineering factories in this country some of which are as up to date and have as much horse power as any of the American plants producing the same commodity. But here we have a Government wanting to keep costs of production down and to give industry a shot in the arm. In the factory where I worked, we turned out a fine product which cost £6 to produce, but when it was finished and marketed,

it cost £13 7s. 6d. That is what happens in British industry.
The biggest part of the price factor is put on outside the production unit, and one of the best services that the Chancellor of the Exchequer could have done for the motor industry would have been to reduce the tax on diesel oil. Many of these motor car factories are built away from the railway and are transporting motor car bodies eight at a time on huge lorries using diesel oil to the factory where the chassis is mounted. The cost of that operation is very expensive, although the manufacture of the body by modern processes is very cheap. I could give some approximate figures of the cost of such production, but it would not be fair to do so.
There is a continual demand for increased production throughout the country, not only by hon. Gentlemen opposite, but also in the country itself. We all know that an increase in the total overall production in British industry is wanted, but what happens? Last summer I heard something which I thought I would never hear again. The chairman of a company, whose factory I know very well and whose organisation I also know, said that the total overall production of that plant was adequate to meet world market demand at the prices then ruling. What he wanted was, not to increase the overall production of the plant, but to increase the production per man-hour. That was the only idea in his suggestion.
It would have meant that, to get highest production value out of a product, in certain lines the output would have had to be almost doubled. In mass production and the conveyor belt system, if 100 units are efficient and new machinery is put in, it is not 100 units that will be needed to be taken off the line to get the full benefit of that machinery and to get the lowest possible price, but 1,000 units, and the argument is that the market will not stand another 1,000 units taken off the one line.
We have here a contradiction in our economy between the individual and business. I can understand that, as an engineer, and sympathies with it. There is a conflict in the engineering industry, and the private company knows very well that if it puts plant and machinery in it will multiply output a unit of capital employed 10 times, but it will not be able


to market the goods at the current price. It does not pay it to have the widest physical investment.
This was done last year by a company that I know and the chairman said so in his speech. It is an engineering company with a very fine product. That sort of thing is in conflict with what this Government and the Labour Government have constantly asked industry. They have asked for high efficiency, higher production and the marketing and selling of the goods, but if the overall production is not increased, we shall be restricting trade.
A selective quantitative outlook is being applied individually in a particular industry instead of there being a quantitative limitation exercised by the Board of Trade or the Government. Each individual company, in seeking to get the maximum profit per unit of output, quantitatively limits that output. As I have said, I came across that last year for the first time since the war. How far it is spreading or will spread I do not know. It will probably spread if the American recession hits this country. It is difficult to condemn a director of a company who adopts that attitude; he is in an awkward position. If he tries to market a vastly increased output, he brings down the price.
I wish to comment on the investment allowance in reference to Scotland, where unemployment is double that of England. Capital investment in Scotland is deplorably low. The Chancellor's measure will not increase capital investment there. We want, in Scotland, new capital and new industries. Will this proposal of the Chancellor encourage the British electricity companies to invest in production machinery at Renfrew in order to keep people there in employment. I doubt it very much, unless there is some Government direction of investment in physical resources so that we can have the investment we need in the place where we need it.
We want investment not only for economic purposes but for a social purpose. I repeat that we badly need new investment in Scotland. We have many huge basic industries there, and I wish to see them maintained. We also require in Scotland, however, a diversification of industry. If an investment allowance is to be given to the great

basic industries—and I can see that there is some case for giving it—surely the effect will be to divert investment into the further capitalisation of the old traditional industries. The source from which we draw these resources is not a bottomless pit, and such a trend will divert investment from new capital development in new light industries, particularly the electronics industry, where it is particularly needed in Scotland.
The Chancellor speaks about the Economic Survey. He should give some thought to Scotland, because those figures relate to England and are not correct for Scotland. Our situation is much worse; our unemployment is much higher.
Like other hon. Members on both sides of the Committee, I am very disappointed at the passing over of the claims of old-age pensioners. I live in Clydebank, where there is a famous shipbuilding yard, most of the products of which go abroad. Right hon. Gentlemen opposite have told us, with great jubilation, that last year was a good one in many respects because the terms of trade were so beneficial to this country. That applies to the products which the shipyard worker builds when he is working to provide himself with food and shelter, but he does not buy the ships. He finds that there are certainly many more commodities being imported in exchange for the ships that we export, but he himself is getting less than he got three years ago. The retired shipyard workers are in the same position.
I am not an economist, and I have always been afraid of statistics. I remember being lectured many years ago by an economist at the W.E.A. He was talking about averages. I was then much younger, and perhaps more cheeky than I am now, so I said, "If a train leaves Newport station at 9 o'clock and one man gets there at five minutes to nine, he catches it. Suppose a man gets there four minutes past nine, he loses it, but on average they both get there at a half minute to nine, and so catch it." Since then I have always been afraid of statistics, and I always admire people who get up here and talk about statistics, because averages—statistics—confound me.
I see the picture rather as an engineer. Engineers may have many


shortcomings, but we are practical men; we do not trust logarithms or averages; we find it better to work by rule of thumb and indications on our machines. I am surprised that the Chancellor has not found some physical means of transferring some of the improved terms of trade to the old folk, the ex-Service men and widows on pension. I receive numbers of letters from widows who are living on 10s. a week and who are having a very hard time indeed. The expenditure of their small income is concentrated on a few necessities, basic foods, the prices of which have risen by 60 per cent. They do not use transport a great deal; they do not buy a lot of clothes. They require these few commodities, and it is in respect of those that they are hit hardest. The Chancellor might have done something for them.
I am really astonished that in trying to help industry the Chancellor has not reduced the tax on diesel oil.

6.26 p.m.

Mr. Beresford Craddock: I am sure that we have all listened with great interest to the hon. Member for Dunbartonshire, East (Mr. Bence). We know that he is a practical engineer with many years experience, and there is nothing that appeals to hon. Members on this side of the Committee more than the contributions of men with practical experience of the subject with which they are dealing.
I am surprised, however, at two of the things which the hon. Member said. One was that one of the firms with which he had been associated in past years always looked to Government contracts for a really substantial profitable price. That surprised me, because during the last war I happened to be a temporary civil servant and had a certain amount to do with Government contracts. From that experience—I understand that the same applies today in respect of contracts put out to industry—I know that those contracts were subject to the most rigorous scrutiny by the costing departments of the various Ministries. I had to examine from time to time many thousands of costings, and, so far as I could detect, there was never any very large margin of profit or great waste of public money in prices charged.
The other point which the hon. Member made, quite rightly, was about the

high cost of distribution. Throughout the whole of our discussion of this year's Budget, we have heard a great deal about the virtues of the nationalised industries. I am sure, however, that the hon. Member will be the first to admit that two of the most important charges contained in the cost of distribution are the cost of coal and of transport, and they have undoubtedly risen very substantially. When praising the nationalised industries, therefore, the hon. Member must not forget that these two play a very important part in the cost of distribution.

Mr. Bence: I agree that there is something in what the hon. Member says about costs of transport, etc. I would remind him, however, that in the case of the product I quoted, the manufactured price of which was £6 at the factory gate, the price was £13 7s. 6d., not only in the currencies of France, the United States and other parts of the world, but also 100 yards from the factory gate.

Mr. Craddock: If that is so, I should like to know what the cause of that is. Speaking generally, however, the cost of coal and transport are important factors in the cost of distribution. I wondered whether I should attempt to catch the eye of the Chair in view of the remark made this afternoon by the hon. Member for Gloucestershire, South (Mr. Crosland) when he accused my hon. Friend the Economic Secretary of being "frightfully sub-intellectual." That rather shook me. I wondered whether to attempt to try to speak, because if he thinks that of my hon. Friend, I do not know what he will think of me.

Dr. H. Morgan: Never mind, risk it.

Mr. Craddock: I intend to. I was most interested in what the hon. Member for Gloucestershire, South said yesterday. He laid much emphasis on the differences between the attitude of those on this side of the Committee about taxation matters and the attitude of hon. Members opposite. With great respect to the hon. Member, who I am sorry is not in his place, I would suggest that the main difference between hon. Members in these matters is that, while we appreciate theoretical knowledge, we believe that the right approach to all these problems is the practical one.
The more I review the financial and economic history of the last five or six years the more I am satisfied that one of the troubles has been that the country has been ruled far too much by intellectual theory and not enough in the light of practical experience.

Mr. Roy Jenkins: Would the hon. Gentleman tell us what practical experience is possessed by his right hon. Friend the Chancellor—whom we all greatly respect—which his predecessors did not have?

Mr. Craddock: I do not know the full career of my right hon. Friend, but I think that it is right to say that he has wide practical as well as theoretical knowledge. Moreover, two of the finest attributes of my right hon. Friend are good judgment and wisdom. For years we have listened to this economic jargon, all the stuff about co-efficient of productivity and that kind of thing. It has never much appealed to me. One of the outstanding features of the three Budgets of my right hon. Friend has been his practical approach to these difficult problems.
The hon. Member for Dunbartonshire, East mentioned the social aspect of the Budget. I am intrigued as I read the history of Budgets over the past 50 years. Probably less than 50 years ago the Budget was looked upon entirely as an instrument for raising enough money to run the country—the defence services and matters of that nature. As the social conscience of the people developed, the Budget, quite rightly, became an instrument of social policy. Today the Budget is an instrument not only of financial but of social and economic policy.
I want to deal specially with one or two features on the economic side. Before I do that I wish to make one comment on the tax side, about the proposals in connection with post-war credits. I believe that there are many people who, if called upon to do so, would surrender their post-war credits to the Treasury. It may be said that they can do that now without being asked, but it seems to be a characteristic of our people that they prefer to be asked to make a sacrifice and then they will do what is asked. It might well be worth while making an appeal to people to surrender their postwar credits.
When post-war credits were introduced in 1940 I did not like the idea, and I never have done so. At that time the people were prepared to make any sacrifice without thought of future monetary recompense. If my suggestion were followed, it might well reduce substantially the outstanding credits, which, I think, amount to about £550 million. It might result in as much as £200 million being surrendered. It is worth trying. If it came about, the Chancellor would be able over a few years to pay back the remainder with greater ease.
I want to concentrate on the economic situation. Everyone will agree that during the past year or two there has been a definite improvement in our export trade and in the position of our gold and dollar reserves. Everyone will agree, however, that we are by no means on safe and solid ground. As has been pointed out, we face increasing competition in future. There is and will be severe competition from Germany, Japan and the United States, and another factor is the growth of economic nationalism in the East.
All these factors will make it far more difficult, to put it crudely and on a practical level, for the country to earn its living. After all, that is what we have to do. We all agree that no longer is the phrase, "Export or die" a Tory myth. We all realise the vital necessity of exports.

Mr. Bence: And imports.

Mr. Craddock: Indeed, yes. Exporting and importing is the way we live.
The Economic Secretary mentioned the Geneva Agreement on Tariffs and Trade. He and the Chancellor both know my interest in this matter. When the Agreement comes up for review at the end of the year, or the beginning of next, I hope that a real effort will be made to get rid of the "No new preference rule" in G.A.T.T. I do not say that merely for the sake of advocating an increase in tariffs or imperial preference. That is not the point. I suggest that at the moment, as a result of that Agreement, we are not free to regulate our own trade and commerce as we should like.
The Chancellor mentioned the Randall Report. In the light of that Report, I hope that my right hon. Friend's hopes will materialise, but I have grave doubts. Before I became a practicing barrister,


I spent some 20 years in business, and I had a good deal to do with business in America. That experience leads me to the view that it is very unlikely that the American businessman will allow the Administration to do very much if it is going to harm American business. I do not blame the Americans for that. After all, it is their right and duty to look after their own affairs in the interests of their own country.
All I want to see is this country, in our trade and commercial affairs, enjoying the same freedom as the Americans do. There is no question that, under G.A.T.T. as it exists today, the Americans are much freer in their business and commercial activities than we are in this country. I have drawn attention to this matter in the hope that something may be done to alter this state of affairs and restore our freedom of manoeuvre.
I appreciate the necessity, as so many of my hon. Friends have advocated, for lowering taxation and helping industry with more credits, but I am bound to say that I am not very happy about extended credits. When I was in business I looked upon extended credits as the quickest way to bankruptcy. But be that as it may, all these things, while they are helpful, are not enough, in my view. We have got to do something more to get industry to put forward its maximum effort.
Some years ago I wrote an article on this matter, and I am afraid that I used a rather clumsy phrase, but it expressed what I meant then and, indeed, it expressed the view that I hold today. I said that what we want in industry is more humanity and less "finanity." I meant to suggest—and this is still my opinion today—that industry should not be regarded as an instrument for putting a lot of money into the pockets of a few people. That is entirely the wrong approach. A good livelihood ought to be provided for everyone in the industry and not for a few. Indeed, by doing that I believe that that is the best way to help our country, because if a man works hard and does well for himself it is not only good for himself but good for the Country as well. I have always taken the view that there are three elements in industry—capital, management and labour—each is essential and each is entitled to a reasonable, though not an

undue, return for the part that it plays in industry.
My right hon. Friend issued a warning in his Budget speech that we cannot afford to have large wage increases. He also advocated that companies should pursue a prudent policy with regard to dividends, and I am bound to say that 1 agree heartily with that opinion. Indeed, I would go so far as to urge on industry that it might well be worth while putting a ceiling on their dividend policy. Having paid their workers, made allowances for depreciation and reserves in the usual way, they should declare for the sake of argument, a 10 per cent. dividend. Of the remainder, half should go back into reserve, and the other half should go to the workers as a bonus on profits, with an additional one per cent. or two per cent. to the shareholders. I am not going into the details of that arrangement, because it would take too much time, but I believe that such a method would help to bring an increasing spirit of partnership into industry.
Nothing horrified me more when I was in industry than to hear people talking about the two sides—"we on this side and they on the other side." There are no two sides. All men and women, whatever position they occupy in an industry, are part of a team, and they are all in it together. We have got to get that spirit fully operating, and that will be one of the ways of helping to solve our problem of increasing the wealth of the country.
I cannot in the next few years see any hope of reducing taxation or expenditure to any extent. We have a tremendous burden of armaments. With the best will in the world, I cannot see the armaments programme being reduced much in the years ahead. We have a great expenditure, and rightly so, on social services. This cannot go down to any extent. Therefore, although I agree with my right hon. Friend the Member for Blackburn, West (Mr. Assheton) that we have got to look into Government expenditure and try to save, I cannot believe that we can save a great deal in that way. What we have got to do in order to maintain these great burdens which the country carries is to increase the wealth of the country—in other words, increase productivity. I believe that will be the most successful way of meeting our problems in the future.
Apart from the purely material or monetary aspect of our problems in industry and commerce, there is also the psychological aspect. I feel that for some years our people have rather lost faith in our country, and indeed I wonder whether they have not perhaps lost faith in themselves. I believe that we have got to do everything in our power to restore that faith. We should do all we can to remind the people of Britain's achievements and of what the people of Britain have done for themselves and for the world by their zeal and initiative in past years, and what they can do in the future. I suggest that my right hon. Friend and his colleagues in the Treasury might well consider a careful scheme of propaganda on those lines, to encourage men and women in industry to do even more than they have done in the past.
I believe that this Budget which my right hon. Friend has just introduced is the best of his three Budgets. When he introduced his first and second Budgets the situation was far more serious financially than it is today. In his last two Budgets he could almost have got away with murder. Today the situation is different. It has improved. My right hon. Friend's approach to his problems this year has been wise and courageous. Despite all the criticism from the benches opposite, I am confident that we shall see excellent results from the way in which he has tackled these problems in his third Budget.

6.50 p.m.

Mr. P. Bartley: I have listened to nearly all the speeches which have been made in this debate in the last three days. There are many points to which I could refer, but I shall restrain myself in the interests of other hon. Members who have already sat here for many hours hoping to speak. During the major part of this debate, especially in the speeches of hon. Members opposite, much has been said about trade, economics and industry. Many hon. Members on this side of the Committee, however, have paid some attention to the Budget's omission of any relief for millions of people who are in dire need.
I am not exaggerating when I say that these people were definitely expecting something from the Budget. In recent weeks, hon. Members on both sides of the House, and even right hon. Gentlemen

opposite, have made speeches admitting the justification of the claims of old-age pensioners, disabled ex-Service men and widows. Many of them went on to say—and it is on record—that they expected that something would be done for these people in the Budget, and we should not be surprised if they were definitely optimistic about their prospects.
Many hon. Members on this side of the Committee live among these people and attend their meetings. A fortnight ago, at the invitation of the people concerned, I attended a county conference of disabled ex-Service men and women. They stated their case for an increase in their basic pension from 55s. to 90s. I did not give my entire support to their claim but, as other Members have done, I acknowledged that they were justified in claiming some increase. Hon. Members on this side of the Committee share the view that the rates of benefit to ex-Service men, widows, and other persons covered by the National Insurance. Act should be restored at least to their 1946 purchasing power.
The changes in other forms of income afford proof that the claim is justified. Many thousands, if not millions, of workers have had their wages increased by 50 per cent. since 1946. A few weeks ago it was announced in the House that retired officers were to have their pensions increased, and a Select Committee has recently been acting in the interests of Members of the House. Although its recommendations have not yet been accepted by the Government, its investigations have proved the case for a 50 per cent. increase in the allowances to Members of Parliament. Many other people have had a 50 per cent. increase in wages since 1946.
A few days ago an hon. Member opposite referred to the fact that, between 1947 and 1951, the cost of living had increased by 40 per cent. and the cost of food by 60 per cent. If we take the period from 1946 to 1954, it is surely no exaggeration to say that there is justice in the claim that rates of benefit should be increased by 50 per cent. That was generally agreed to be an appropriate measure of justice for those people who are in receipt of these benefits.
In addition to benefits received under the National Insurance Act, there are some members of the population who


have not received the appropriate rate of pension from any Government in the last seven or eight years, namely, the widows, who are still receiving 10s. a week. About three weeks ago, in answer to a Question in the House, it was stated that these widows number just over 200,000. Many of them find conditions very difficult.
Some of them undertake part-time jobs, but they receive very small wages, and are experiencing such difficulty that they have to apply to the National Assistance Board to have their reliefs made up to the recognised scale. All those people have a claim for the restoration of the 1946 purchasing power of their rates of benefit. That would mean, roughly, a 50 per cent. increase. On 10th December, in reply to a Question, it was said that the cost of restoring the 1946 purchasing power in respect of all benefits would be £51 million, and for retirement pensions only, £37 million.
It has been suggested that our present situation leaves no margin for play in this respect, but the right hon. Member for Blackburn, West (Mr. Assheton), speaking yesterday in another context, suggested that in the interests of production something should be given back to Surtax and Income Tax payers. He went on to say that with a total expenditure of £4,500 million it did not matter much if we added another £50 million here or there. I believe there is a much stronger claim for setting aside £50 million for the people I have mentioned than for Surtax and Income Tax payers.
Last night my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) referred to the fact that the Chancellor had not attempted to make any estimate of increased national productivity during the coming year. Last year the increase amounted to about £500 million, and my hon. Friend said that it was not saying too much to suggest that we could expect an increase of about £400 million this year. Some of that money will go in increased wages, but £50 million might well be used to increase the pensions of those people to whom I have referred.
The Chancellor of the Exchequer said in his Budget speech, when dealing with the social services, that there was an increase of expenditure for the National Assistance Board of £5 million this year.

There are one or two small ways in which the Board could alter its regulations to give some of these people a higher allowance, and I suggest that the Government ought to consider persuading the National Assistance Board to alter its regulations to enable it to do so.
There is one practice of the Board that is intrinsically wrong. The Committee will remember that provision was made in the National Insurance Act for persons who work beyond pensionable age to be entitled to an increased pension for 25 further contributions made to National Insurance. Many thousands of men work beyond the age of 65 and many women work beyond the age of 60 and earn increased pension. That provision was made obviously as an inducement to those people to continue to work.
In practice, what happens? I raised this matter in the House recently with the Minister of Pensions and National Insurance, with no good result. In spite of the increased pension they earn, those people still have to apply to the National Assistance Board for supplementary allowances, and when they do their increased pension is taken into account, and thus taken from them when they have earned it. That is disgraceful. It is intrinsically wrong, because it is contrary to the purpose of the Act and defeats its purpose. I have had hard cases submitted to me, and I have approached the National Assistance Board about this matter, without any good result. The Government should persuade the Board to alter its ways so that people who work after pensionable age and earn increased pension are not penalised.
There is another thing that could be done that would particularly affect the widows. Some who take a part-time job receive, apart from their wages for the part-time job, 10s. a week pension. In the calculation of their allowance, £1 of their wages is disregarded. That has been the case for a considerable number of years. I suggest that, to help these people, the amount that is disregarded should be increased. They should be allowed to retain more of the wages that they earn.
It has always been assumed, I think, that whatever the rate of pension may be it will not be sufficient for all of those who receive it to live on. It has always been assumed that some of the pensioners


will have some other income, and those who have not apply to the National Assistance Board for supplementary pension. I suggest, therefore, that there should be not only an increase in the rate of pension and of other payments under National Insurance by 50 per cent. on the 1946 rates, but also an increase in the existing scales of the National Assistance Board, so that those who require more assistance may obtain it.
I have not attempted to deal with the economic and industrial aspects of the Budget, for there are many other hon. and right hon. Members who are more competent to deal with them. I have contented myself with dealing with one matter only, the difficulties of the pensioners and the widespread disappointment because the Budget does not help them. There undoubtedly is disappointment, and some of us will hear more about it this weekend when we are back amongst our people. Refined economic arguments about the Budget will not convince them that something could not have been done now to help them.
It is no good telling them to wait another six or 12 months for a quinquennial review. They are feeling their need already, and they appeal for an increase of pension now, and we on this side of the Committee agree that they are justified in making it. I appeal to the Financial Secretary, and through him to the Chancellor of the Exchequer, to consider this matter now, and not to close the door even temporarily against those people, so that we can meet their just claims, which have been put forward not only by hon. Members on this side of the Committee but also by hon. Members opposite, both here and outside. Let us respond to the appeal of these needy people, and then the pride that hon. Members opposite feel in the Budget will be shared more widely.

7.6 p.m.

Mr. Denys Bullard: The hon. Member for Chester-le-Street (Mr. Bartley) has confined himself to one aspect of the Budget, namely, the social services. I hope he will forgive me if I do not follow him into that matter in detail because I have another with which I want to deal. I myself sincerely regret that my right hon. Friend was not able to make more provision for the old-age pensioners and the disabled ex-Service

men on pension, but I take a little comfort from the statement that there is a possibility that before we have another Budget something may be done about them. There is great hardship among those people, and very soon, if not at present, we shall have to do something about it. I wish it had been found possible to do it at the present time.
I want to deal with the question of food and the payments for food and the various subsidies which have received attention in the Economic Survey in all the pre-Budget documents and in the Budget speech itself. There has been a certain amount of merriment about chicory. However in my part of the country that is a very important matter. There is a good deal of land in my constituency on which chicory is growing.
Chicory may have seemed to come rather incongruously into the Budget but the increase of 5s. 9d. cwt. means a good deal to my part of the country not only to growing chicory itself but also to the farming. Apart from chicory's food value—and I hope it has a genuine food value in itself as well as value as just a thing to mix with coffee—it has a very definite value as a rotational crop. It can be grown on sour land and is not subject to the sugar beet eelworm, and it is just the sort of root crop that the black fenland in my district needs to provide a sound rotation.
I turn now to the main matter of financing the food for our people. At the beginning of his Budget speech, my right hon. Friend the Chancellor of the Exchequer drew attention to the improved terms of trade and pointed out that it was not altogether a one-sided affair. Although we had been able to buy 9 per cent more for 4 per cent. less cost, he also pointed out that we could not have it both ways; we could not have the benefit of both cheaper food and raw materials and also expect to sell to those countries, from whom we were buying more cheaply, increased quantities of exports. I hope that those who are smitten with the idea of "food at any price" will bear in mind that lesson.
I hold firmly to the view that agricultural depression once started soon leads to depression in other spheres. We need to be guarded in looking at the benefits of cheap food bought anywhere


in the world at any price, because it can have quick repercussions upon a manufacturing country like our own.
I hoped that the right hon. Member for Leeds, South (Mr. Gaitskell) would have been here to hear my few remarks on his comments yesterday on food consumption. He referred to the table on page 21 of the Economic Survey and made play with the fact that the consumption of many items of food was less than in 1950. The right hon. Gentleman was fully answered by my right hon. Friend the Financial Secretary, who pointed out the special nature of what was done in 1950 in the way of running down stocks. But another point which is frequently overlooked in food matters is that turnover in agriculture is very slow and the benefits of changes are not realised immediately.
One of the items in which consumption was less than in 1950 is eggs, although the 1953 figure is higher than in the two preceding years. Increased egg production, and, therefore, consumption, is related to the availability of feeding stuffs. The process of making feeding stuffs available off the ration is long and complicated and was begun only a short time ago. It is not so very long since hon. Members opposite were prophesying that eggs would be remarkably scarce. In considering changes in consumption, it has to be borne in mind that improvements in agricultural production take a long time to work out. This aspect was overlooked during yesterday's debate.
Expenditure on food and food subsidies has been dealt with in the Budget speech and in the various documents that we have had before us during the last few days. We were reminded that last year civil expenditure at £2,235 million was up by £146 million, and my right hon. Friend said that this was due considerably to increased expenditure in the spheres of food and agriculture. He did mention, however, that £109 million was to be collected from stocks previously acquired by the Ministry of Food.
Civil expenditure is expected to be higher this year also to the extent of £212 million over last year's estimate, but the Exchequer liability on home agriculture is down, in the Annual Review, by £30

million. Agriculture and food cannot, therefore, be blamed for this particular increase in expenditure. Nevertheless, the home guarantees to agriculture will cost somewhere about £150 million, in addition to which, as I understand it, there will be special grants of about £50 million in production grants. This leaves out of account the special subsidies of a welfare nature amounting to £87 million. I have never been very much impressed by the sharp division which is sometimes made by people who attribute one aspect of subsidy specially to the consumer and another aspect to the producer. A good deal of hair-splitting is done on this matter, the two sides of which are closely interlocked.
Expenditure on maintaining the home agricultural guarantees is worth while, from an insurance point of view not only because of defence, but also because it would be dangerous from an economic point of view for the country to depart in any way from the policy of full agricultural production. There is also a counter-balance to this increased expenditure. The payments are higher because, broadly speaking, world food prices are lower. The consumer, who is often also the taxpayer and is responsible in the end for a great part of this payment, gets the benefit of cheaper food from overseas and also, in the long run, cheaper food from home sources. Eggs are an example of where this has already happened. I hope that as things work out and we make more use of cheaper feeding stuffs, the consumer will get the benefit also, for example, in the case of pork.
I am glad that my right hon. Friend the Chancellor stressed that the Government stand by these payments necessary to maintain the guarantees. Nevertheless, there is plainly a duty on agriculture to keep costs down. My right hon. Friend referred to ways of reducing the Exchequer liability and, rather ominously, I thought, used the phrase:
Of this we shall hear more during the year."—[OFFICIAL REPORT. 6th April, 1954; Vol. 526, c. 210.]
I wondered what that phrase implied. I hope there is to be no arbitrary cutting down of the assistance which is given to agriculture, for action of this kind would almost certainly lead to decreasing production.
There is a joint responsibility for looking into the question of the undoubted high costs in certain aspects of home agriculture. The Government have an elaborate machine which they use every February for going into the costs question, and the National Farmers' Union also has an elaborate costing machine. One of the troubles is that each February these two machines are brought into a kind of clash. They should both be concentrating on means of lowering costs rather than warring against each other. The National Advisory Service and all the technical services have tended to concentrate too much on the purely technical side. I hope that in future the question of costs will be brought more to the fore in their studies.
We are often told that our costs compare favourably with those of Denmark as regards, for instance, bacon. Anyone who has looked into the Danish system knows very well that Danish costs are lower largely because they have concentrated so much on testing their stock, both by litter testing and by recording of every kind. This is a field in which we have hardly begun to move. I know that certain farming organisations are trying hard to get these things going here, but, all the same, we have not moved far. I think there is a lack of co-ordination here and that the Government should take a definite lead. I hope they will do so.
The Chancellor made reference to various ways by which he is hoping to set a limit on the Exchequer liability as regards expenditure on agriculture. He said he hoped that deficiency payments would help. He also used the word "quantification," which, although not a new word, is one which is creeping more and more into our debates. This is the method that has been used in the case of milk, and I personally think it is better that, if we are sure we have got to the level of production that we want, we should say so and fix our policy accordingly. But I do not want to see production being limited in the sense of being cut down.
I hope the Chancellor is going to pay attention to the possibility of limiting the Exchequer liability by using the levy subsidy method, particularly in the case of wheat, where it can be used. It has operated before and it can operate again. I am sure he will give his attention to that possibility.
While I am on this question of the contribution towards reducing costs, I want to mention the Chancellor's proposal about investment allowances. When one looks at the figures for the agricultural industry as given in the Economic Survey—this table has been used a great deal during the debates—we find that investment in agriculture is £87 million in 1953 as against £84 million in 1952 and £89 million in 1951. There is, in my opinion, a great field for improvement in investment on both machinery and buildings on farms.
I know there is supposed to be plenty of money in the agricultural industry to carry out these investments without further assistance. Yet it is my experience that that is far from being the case, and I believe that this contribution will be quite a considerable one and will help particularly in the provision of new modern plant which is so very much required. Some of our highest costs are not in production but often in the handling and distribution side, and I hope new plant for storing grain and conditioning it will be so used that eventually it will deal with it in bulk instead of by the ancient system we employ in this country of manhandling it in sacks. I believe this kind of development will be stimulated by the investment allowance.
I am not very clear whether this allowance is going to be claimable in the case of new houses erected for farm workers. It is claimable on farm buildings, which already have a 10 per cent. allowance given to them earlier, and similar allowances are available on farm workers' houses. I shall be interested to know whether this provision will be available in the case of houses provided for agricultural workers. I look forward with interest to studying the details in the Finance Bill when it comes along.
There is another item which I should like to mention, and which also concerns rural conditions. It is the question of the diesel oil tax, because this tax hits the countryside in a particular way. Communications are not very good in the countryside, to put it mildly. I belong to East Anglia, and anyone who has tried to move about that area knows that there is no other part of the country where movement is more difficult unless one has a car. Certainly, our rural bus services


are extremely inadequate, and I hoped that the Chancellor would have been able to give relief in this respect so that we might have some improvement in our rural bus services.
Finally, I must agree that this is not a spectacular Budget, but it is sound. I am quite certain that the policies which the Chancellor set forth in his previous Budgets were right, and I am sure the move, in this one, for greater productivity is also right. My right hon. Friend is correct in giving his policies time to work out. They have already brought benefit to the country as a whole, and I believe they will bring more. I hope among them will be benefits in the social service benefits, particularly improvements in pensions. As I said when I began, that is something for which we all earnestly hope, and I feel confident we may see it before too long.

7.26 p.m.

Mr. Roy Jenkins: I regret that the Chancellor of the Exchequer is not here to see this crowded and enthralled Committee dissecting his extremely exciting Budget, but I am at least glad to see that the Economic Secretary to the Treasury has come back, although he can only be seen from some quarters of the Committee. However, I am glad he has arrived; otherwise, I would have found myself in the dilemma of either trying to comment upon the speech of the hon. Member for Norfolk, South-West (Mr. Bullard), which was interesting and well-informed but which was about a subject of which I have no particular knowledge, or commenting on the speech of the Economic Secretary in his absence. But he is back, and I hope that he will soon be in his usual place on the Treasury Bench, so that I shall be able to turn to some of the things he said this afternoon.
Now that the hon. Gentleman has taken up his usual position, I should like to deal with the earlier, less technical and more polemical part of his speech, the part which I take it the hon. Member for Peterborough (Mr. H. Nicholls) was not referring to when he spoke about sub-intellectuals or super-intellectuals who came along telling the Committee about our gold reserves, instead of making practical suggestions. I hope it

was not his hon. Friend he was criticising in that connection.
In this earlier part of his speech, the Economic Secretary, for the sake of making some political points, turned his back upon the facts of the situation to argue something which suited his own dialectics but bore very little relation to what has happened. He spoke a great deal about my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) having lubricated the wheels of production or the machinery of production with excessive purchasing power, and he devoted a great part of his speech to an attack upon the Labour Government and on successive Chancellors who held office in those days for having pursued a too expansionist and too easy policy, thereby giving encouragement to consumption to an excessive extent.
One would have thought that he was dealing with a situation in which the present Government could congratulate themselves on having encouraged those other things which ought to come before production because of our difficulties. Of course, when one speaks of having allowed consumption to run a little too high, what one presumably has in mind is the adverse effect on investments and on exports. It was very difficult to imagine what the hon. Gentleman had in mind, especially when we think of what has been the result of the past year. The Economic Survey makes absolutely clear what has happened. While some things have gone well, both investments and exports have lagged, while consumption has increased sharply.

Mr. Maudling: Is it the argument of the hon. Gentleman that consumption should therefore be further restrained by increased taxation?

Mr. Jenkins: No, but the hon. Gentleman devoted the earlier part of his speech to trying to paint a contrast between those lush days of the Labour Government, when we ignored exports and investments and allowed consumption to go up to excessive levels, with what he says has now been achieved; whereas the salient feature of the last year has been that consumption has gone up a great deal and that exports and investments have been the two main disappointing features of the situation. The Economic Survey is very damning about the policy of the


right hon. Gentleman in his Budget last year and its results. We find this on page 35:
Particular importance was attached to increasing industrial investment and to creating a more favourable climate for the expansion of exports.
And a little further on the same page:
But so far there are no clear indications of any marked increase in capital expenditure by private industry.
And later:
For while there was some increase in earnings from exports to North America, our total export earnings in 1953 were appreciably lower than in the previous year.
It is not an encouraging picture of the last year to have these two things as the chief aims of that Budget, and then to read those comments about what happened. It does not square with the picture the hon. Gentleman was trying to paint of consumption having run away in the days of the Labour Government while priorities are now being applied.
One of the thoughts we are left with as a result of this Budget and the previous one, looking at the two together, is that the general picture is bewildering. We ought to have an authoritative statement from the Government at some stage in this debate as to their policy and aims for the future. After all, 1952–53 was a year of slack in the economy, of growing unemployment and of sagging production. At the end of it the Chancellor came along and presented what he called an incentive Budget with a substantial number of tax concessions which we, on this side of the Committee, think were wrongly distributed.
Then in 1953–54 the picture improved somewhat. The slack was taken out of the economy, unemployment went down and production went up again. Yet the Chancellor came along at the end of that and said he was unable to give any concessions to anybody, not even to people with claims as pressing as the old-age pensioners, whom he mentioned specifically in his speech and to whom he paid lip-service.
So, although we have had a year in which the total resources available to the country increased by £785 million and consumption went up by £350 million, the Chancellor was not able to spare a penny for a claim as pressing as that of the old-age pensioners. It is not a good comment on Butlerian finance if, at the

end of a year as apparently good as this one has been, he is not able to provide any money for these things.
What about the future? What is the Government's aim? What ought the people who have legitimate claims to hope for? Ought they to hope for a return to 1952–53 with sagging production and growing unemployment, or for a year of increasing production? Out of which are they more likely to do better? That is the difficulty we are left with as a result of the history of the last two years.
I wish to say a word about last year's increase in production. In this connection, on Tuesday the Chancellor announced in a ringing voice:
In that year [1953] industrial production reached heights never before recorded in our country's history.—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 195.]
His followers behind him cheered loudly—it was about the one thing they had to cheer in the course of the speech. It is true that production went up somewhat last year, but these developments can be exaggerated by the way in which they are put, and it would be equally legitimate to frame the claim in a different way by saying that 1953 undid some of the damage of 1952, so that we were back a little above the 1951 level and if we continue to do well the Government's record will not be very much worse than that of the Labour Government. But to claim automatically that because there has been an increase after a year of slack, that is a great achievement, is to put things in a misleading way. It rather reminds one of the American commentators who, after putting forward rather disturbing estimates of production and investment programmes for the current year, say that the estimate is that 1954 in this respect will be second only to the record-breaking year of 1953; which almost certainly means that there will be a substantial recession.
Now I shall refer in more detail to the investment position, which is admitted on all sides of the Committee to be the most disturbing economic factor with which we are confronted. The Chancellor has sought to meet this by the device of the investment allowance. In view of the stagnating investment position and of the comparatively low level of investment in plant and machinery in private industry at the


present time, it is ironical to remember the remarks addressed to the House from the Tory benches when the Labour Government were in power, and when speakers on successive Budgets talked as though, by our profligate policies, we were starving British industry of equipment. It is the hard fact that, despite the taxation policy of the Labour Government, despite anything else which was done in those days, there was consistently a higher level of investment in plant and equipment then than at present, and it is important to remember that today.
So far as the investment allowance is concerned, this is certainly in the nature of a subsidy to industry. It is not necessarily wrong for that reason, but we must face the fact all the same. Whether it will be more effective than an increase in the initial allowance it is difficult to say. It depends on what firms and circumstances one is dealing with. I believe the Economic Secretary himself suggested that the position is rather different with firms of different types.

Mr. Maudling: Mr. Maudling indicated assent.

Mr. Jenkins: It is probably true that smaller firms are not typical of the picture given by the capital account of companies in the table in the Economic Survey and that, despite the overall picture, many of them may well be short of cash. In so far as these firms are held up for that reason, the 20 per cent. investment allowance will be less of a help to them than a doubling of the initial allowance, because it will not give anybody any more cash in the first year, in the year in which the investment is actually made, whereas a doubling of the initial allowance would do so.
Therefore, the justification of this investment allowance is not that it will make more cash available to anybody but that it will act as a carrot to companies which have not been willing, for a variety of reasons, to make the investment in the past. It does not give the cash, but incentive to make the investment. Therefore, it is not enough to talk, as the hon. Member for Peterborough did, as though there was some dreadful contradiction between our support for a general policy of specific stimulants to investment and the suggestion of my right hon. Friend the Member for

Bishop Auckland that we might combine this with some increase in the Profits Tax. There is not necessarily any contradiction between those two points of view, because companies are not generally suffering from a shortage of finance, and the main purpose of the investment allowance must be, not to provide companies with money to make the investment, but to give them a definite incentive to do it.
I should have thought that, as we have this dichotomy between companies of different types, there might be something to be said for allowing companies an option of choosing either the investment allowance or possibly an increased rate of depreciation allowance. That is a point I put forward tentatively. Obviously it is a Committee point, which we may discuss on the Committee stage of the Finance Bill.
On the Budget generally, I would have been inclined to agree with my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), who said last night that he thought, on the whole, the Budget was a little too austere. If one were asked where some of the money was to come from for some of the Claims we think should be met, my answer would be that, with the rising curve of savings, and with the contingent danger being that of a deepening American recession and falling off of demand, the Chancellor might have been advised to have gone in for a less austere Budget. Private savings have gone up substantially and may continue to do so. If that is so, it is an important factor to take into account in framing the estimate of the course which should be pursued in the coming year. I was surprised that the Chancellor made no particular reference to it in his speech.
One agrees with what the Economic Secretary said earlier, that one cannot be too sure about estimates of figures of this sort, but I would have thought that some estimate of what is likely to happen to savings was an extremely relevant factor in the situation. The fact that no mention was made of it was an omission from the Chancellor's speech. I should like to know the assumption of the Government on this, because it seems a vital piece of information in deciding what course should be followed.
The Chancellor has now put himself in the position in which he has no room to manœuvre and where, after an un-precedentedly easy and advantageous year from the point of view of the country, he cannot meet any of the most pressing claims because he gave away revenue so easily last year. As "The Times" said the other morning, £350 million worth of revenue in a full year was given away in direct taxation concessions. That is going to companies and people very largely in the higher income groups. The ground on which the Chancellor justified the distribution of this concession last year, that it was essential to stimulate investment in industry, has been completely invalidated by the outcome. It just has not taken place.

Mr. Maudling: Mr. Maudling indicated dissent.

Mr. Jenkins: The hon. Gentleman shakes his head. Does he mean that if these concessions had not been made, industry would have been so depressed by the Tory Government that investment would have been still lower?

Mr. Maudling: If the concessions had not been made, industry would have felt the continuing effects of the withdrawal of initial allowances.

Mr. Jenkins: The hon. Gentleman must be aware that one is not talking primarily about initial allowances. This is not the most substantial item. The item is the reduction in Profits Tax camouflaged by the introduction of E.P.L. and the cut In the standard rate. Those were presented, and to a large extent justified, as being necessary to stimulate investment in industry. Investment has not been stimulated in private industry. Either these inducements failed or, if they had not been given, the result would have been still worse.

Mr. Maudling: The fact that the 1953 level of investment shows no change in these matters from the 1952 level does not mean that there was not a considerable change in the first part of 1953 and at the end of the year, because there was certainly a great change.

Mr. Jenkins: I cannot put my hand on the evidence at the moment, but my strong impression is that the Survey said exactly the reverse.

Mr. Crosland: No sign of any marked increase.

Mr. Jenkins: It is as my hon. Friend says. I think the hon. Gentleman is very much trying to have it both ways. He cannot say that investment was picking up very satisfactorily towards the end of 1953 and then say we must give this extra shot in the arm. Either the measures of his right hon. Friend last year did not prove fully effective, or there is no reason for this investment allowance, which, although it may be necessary, is not in itself a desirable piece of taxation remission.
The main basis of our charge against the Budget is that it is a mean and ungenerous Budget because the Chancellor, by misplaced concessions last year, has put himself into a position in which he cannot meet the claims which are absolutely necessary.

7.46 p.m.

Sir Waldron Smithers: I hope the hon. Member for Stechford (Mr. Roy Jenkins) will forgive me if I do not follow him— [HON. MEMBERS: "Why not?"]—because I have some points to make and I do not want to take up too much time. I do congratulate the hon. Member on the fluency of his expression. I think the way he spoke was wonderful, although I do not agree with him.
I have had the honour to be a Member of this House for nearly 30 years, and I have rarely heard such a brilliant speech as we had from the Economic Secretary this afternoon. It was a lecture in economic truth, full of common sense, and I hope it will be widely read and sink into the minds of hon. Members opposite. I want, to the best of my ability, without going into too much detail, to reinforce some of the warnings and principles he so ably put forward. I want to try to dig deep into our problems and their solutions. If good principles are applied, good results will follow; and the opposite also is the case.
I think this Budget is rather too austere. Taxation is still too high, and Government expenditure is still too high. The Chancellor may say that he cannot reduce taxation because he has not the money, but he will not get the money until he reduces some of that penal taxation and thus restores incentive for people to earn more. I hope that, as things improve, he will have more vision and


courage to take risks. The position is better, but it is not good enough. We are not yet out of the Socialist wood.
This week the Committee is discussing expenditure of some £4,500 million, and we have heard in speech after speech that we should increase this or that, comparing it with previous years. The question we have to ask ourselves is, What sort of pounds are those £4,500 million? Twenty years ago the same value could have been expressed in about half the amount of pounds. That is mainly due to the way in which the Socialist Government ruined the credit of the country. It is a vast sum with such potential reactions that many people do not seem to realise or to be able to grasp all its implications. But the issue is quite simple. There is no difference in principle between the Budget of the country and the budget of the humblest home. If you spend more than your income, or if you live extravagantly, it must lead to disaster and bankruptcy. I do not think that that truth is sufficiently appreciated.
I now have a rather difficult point I wish to make, and I hope that hon. Members will bear with me. I feel it my duty to make this point, and if I did not do so I should go home calling myself a coward. The difficulties and the problems confronting the Chancellor are basically neither economic nor financial. They are spiritual and moral problems. The command is:
But seek ye first the kingdom of God and His righteousness and all these things shall be added.
That means the material things, but if we put the cart before the horse, it means disaster. Such things as confidence, credit, stability and patriotism cannot be valued in pounds, shillings and pence in the balance sheet of a company or the Budget of a country, but they are the only foundations on which a prosperous economic and financial position can be built.
Last Sunday the "Sunday Times" in its leading article said this:
Confidence is the foundation upon which alone unduring economic prosperity can be built. If today the economic barometer while not yet at 'set fair' is favourable, it is because to a degree beyond expectation a year or so ago, confidence has been restored.
The Chancellor had very difficult decisions to make, and I wish to be quite fair to him. But the main difficulty with

which he was confronted comes as a result of six years of Socialist philosophy which ruined the credit of the country and destroyed confidence. The same kind of thing happened in 1931. I know, because I worked closely with the late Mr. Neville Chamberlain in those difficult days. King George V came back from Scotland suddenly, and the Coalition Government was formed for one thing only—to restore confidence.
When will hon. Members opposite learn that a policy of nationalisation at home and bulk purchase abroad destroys healthy competition and does not allow the law of supply and demand to operate freely? Any attempt to break the law of supply and demand will result in that law coming along like a steamroller to leave us flat on the highroad to reality. If we restrict consumption, we shall restrict production, and another dose of Socialist policy would spell irreparable disaster.
As the Economic Secretary said in his speech, since 1951 many controls have been removed and progress is encouraging, but it will take several years and several harvests before the result of the application of sound principles can be seen and for production to increase. I am one who thinks that more could have been done more quickly and with greater courage. So many politicians will not do what is economically sound because it is electorally inexpedient. The answer to that is that we should tell the British people the worst, we should tell them the facts and the truth and they will never let us down. The Prime Minister once told the country that he could promise them nothing but blood, sweat, toil and tears. That rallied our people, and we won the war. Let our Ministers today take their courage in both hands and make the same appeal to the country. The response will be the same, and again we shall win through.
In considering the Budget, let it never be forgotten—and this is no political point—that England is the one great country in the world which is not and cannot become self-supporting. We have to import roughly half of our food and raw materials. To do that now that the sellers' market is over, and American aid is only for defence, we have to export goods and services at world competitive prices or we shall be faced with starvation.
In the Economic Survey for 1954 at paragraph 106, it states:
The return of buyers' markets abroad has two particular implications for the home economy; productivity in industry must be increased and costs and prices must be kept down. If in present circumstances the prices of our exports generally were to be pushed up by a rise in internal costs, we should be taking a short cut to national bankruptcy. Our competitive power would be disastrously weakened, and the consequent worsening of the balance of payments would destroy for the time being any chances of a further improvement in the standard of living. This is what must happen if increases in productivity are regularly outstripped by rises in money, wages, salaries and profits. But if output per man rises substantially an increase in real wages can be achieved at the same time as costs are reduced.
In his Budget speech the Chancellor referred to the danger of increases in wages. To increase wages today, or pensions, or any other Government expenditure, without increasing production does no good but real harm to the recipients and to the country. It simply means printing more and more pieces of paper— £ notes—which we can neither eat nor wear and which must go down and down in purchasing power every day.
Since 1946 wages have risen by about £1,000 million a year. As a consequence, the purchasing power of the £ is only 13s. 7d. compared with 1946. The logical conclusion is that unless the rise in wages is checked the £ will go down further in purchasing power. If the demands are granted, they will again increase the cost of living. Fares and freights and other costs will go up, and soon there will be another demand for increased wages and we shall find ourselves involved in what is known as the "vicious spiral."
Any increase in wages must increase our costs of production and impede or destroy our ability to compete today in the markets of the world. The Chancellor said in his Budget speech:
The next large group is that of the social services. The provision here amounts to no less than £1,327 million—an increase of £63 million over the corresponding provision in the original Estimates for last year."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 210.]
I have lived in a small country village all my life, and I am not saying this because I wish to be hard but because it is an absolute economic truth. The root cause of our insufficient effort can be found in the comprehensive Welfare State, and I emphasise the word "comprehensive." In a Christian country we must help those who fall by the wayside in the battle of

life through no fault of their own. But to tell 50 million people that the State is a fairy godmother with a bottomless purse who, whether they work hard or do not work at all, will keep them from the cradle to the grave, is criminal folly. It destroys character and kills initiative. People are no longer as thrifty as they once were. Home life is undermined and, consequently, there is a wave of crime and hooliganism.
I hope every hon. Member has studied the three articles by Lord Beveridge recently published in the "Sunday Times." I feel justified in making this point because, as long ago as 2nd November, 1944, I moved an Amendment to a Government Motion to establish an enlarged and unified scheme of social insurance and a system of family allowances. My Amendment was,
While welcoming the aspiration to establish a solvent system of social insurance, declines to give its assent to proposals calculated to raise hopes which may not be realisable at a time when the financial and economic future of the country is in the melting pot.…
May I say that the Amendment which I then moved, and what I then said, has come true? I note, and I expect hon. Members will have noted, that there was a debate on this question in the other place yesterday.
If hon. Members think I am exaggerating, I will give them a quotation from what Commissioner Lamb of the Salvation Army said years ago—and it was true then, it is truer still today:
The country has during the last decade spent over £1,000 million on the relief of able-bodied men and women and got nothing for it but a heritage of misery and demoralisation.
The biggest obstacle to recovery and to the settlement of strikes is ignorance. It is not their fault, but how many of the men involved know the meaning or the importance of "invisible exports," "the balance of trade," or "the dollar gap"? But these are vital to every home.

Dr. Morgan: The hon. Gentleman should wave his magic wand and solve the problem.

Sir W. Smithers: I do not expect the hon. Member knows what they mean, either.
To put it in simple language, there is no difference in principle between the budget of the humblest home and the Budget of the country.

Dr. Morgan: The hon. Member should not read his speech.

Sir W. Smithers: I am trying to compress my remarks so as to be as brief as possible in order to give other hon. Members a chance to speak.
The housekeeping accounts of the country are the Civil Estimates, and I want the Committee for a moment to look back on the last 50 years of Rake's Progress. In 1900, the Civil Estimates were £23 million. This year they are £2,400 million. As a consequence, the purchasing power of the £, compared with 1900, is only 6s. 3d. If we are to survive, a halt must be called at once. If the men will not listen to reason, they will have to learn their lesson by bitter experience.
To have a showdown now would be very serious, but not as serious as a continuation of demand after demand for higher wages with threats of strikes. The only way to improve conditions and to restore prosperity for all, down to the humblest and the poorest, is to put more goods and services behind the paper £ already in existence, so that their value may be increased. It is much better to have a showdown now while there is something in the till.
A decision must be taken at once by the Government. Who is to govern the country? Her Majesty's Government or the trade unions? The power politics of the trade unions, wittingly or unwittingly, is Communist technique. If we are to win through there must be discipline in industry. The captain of a ship does not call a committee meeting of the crew before giving an order which will save the ship from disaster.
Hon. Members opposite should remember what two members of their own party once said—two who had had experience of the 1931 crisis, caused by the existence of a Socialist Government. Those two sayings are as true today as they were when they were made. Mr. Ramsay MacDonald, on 25th September, 1933, speaking of the 1931 crisis, said:
Two years ago the problem that we had to face was not merely the question of the distribution of wealth, it was the question of the existence of the wealth itself.
Mr. Ernest Bevin said on 4th April, 1944:
I, as an old trade union official, do not want £10 a week if I can buy only £2 of stuff

with it. I would rather have £5, with which I could buy £5 of stuff.
Here is another thing which the Chancellor must tackle. I thought you might stop me on this point, Sir Charles, but I understand that county councils are compelled to spend some money because of Government policy. Local government expenditure is the point I have in mind. In 1932 the average rate in the £ levied by all county councils was 11s. 4d. The latest average rate is 21s. This means a heavier burden on industry, and I think the Government should introduce some legislation to limit the expenditure by local authorities. Here is a quotation from the "Statist" of 3rd April:
Every exporter knows that to succeed in a buyers' market he must have three things. Goods at the right price, goods of the right quality, and integrity of delivery dates.
All these strikes and threats of strikes and working to rule make it almost impossible for manufacturers to give a date of delivery for their orders. That is one of the reasons why the export trade is not as good as it should be.
The defence expenditure in the Budget is very heavy, but the best contribution to peace is for our policy to be—and every day we see signs all over the world that circumstances are compelling it—to remove all barriers to trade both at home and abroad. Our slogan must be "Free trade, a free and sound currency and no coercion." If goods cannot cross frontiers, armies will.
The Economic Secretary referred to freeing the £, and I welcome the encouraging remarks which the Chancellor made about it. He said:
There is no need for me today to dwell at length on the vital need to maintain confidence in sterling, of increasing our gold and dollar reserves without accumulating corresponding short-term debts, and of winning a surplus which will enable us to make a worthy contribution to overseas development.… These purposes compel us to do all we can both to increase our earnings, particularly from exports, and to enlarge the volume of world trade and the freedom of currencies, especially sterling."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 212.]
I say this with all humility: at last he is beginning to learn some of the things which I have been telling him for the last two or three years. Let him have the courage to make sterling freely convertible tomorrow morning. I am quite certain that it would be a major contribution to our economic recovery.
Our first social service must be food. What is the good of having children and teachers in State schools and doctors, patients and nurses in State hospitals if they have nothing to eat? The biggest menace to our economic and financial progress is atheistic and materialistic Communism in all its aspects. The cost of the welfare State has become too great a burden for our vital export trade to bear.
We fought two wars for freedom. We are facing today an even greater menace. Thousands died and thousands were wounded in a cause made sacred by Him who died that we might have life and that we might have it more abundantly. I appeal to the House and to the country to support this Government which is trying to clear up the mess which it found in 1951, to do away with State control at home and with bulk purchase abroad and to restore freedom and dignity to the individual, which is the only foundation for economic and financial progress and prosperity.

8.10p.m.

Mr. Wilfred Fienburgh: If the hon. Member for Orpington (Sir W. Smithers) will not find it presumptuous of me, I would like to congratulate him on the magnificent way he read his speech and also upon its style, if loudness of delivery be an expression of style. I would also congratulate him on the persistence with which he ploughed through to the bitter end, even though he turned over some of his pages twice in the course of his address, and upon the persistence with which he clings to social and economic ideas that went out with the pachyderm. Coming from the constituency which he represents, it is perhaps not unnatural.
Before addressing myself to the Budget, perhaps I might commiserate with the Economic Secretary to the Treasury who. I understand, owing to the recommendations of the Boundaries Commission, finds himself suspended, like a barrage balloon, over Hatfield and Barnet wondering where to descend in search of the largest gold reserve in the shape of Tory votes.
In this year's Budget, the Chancellor of the Exchequer is a penitential Chancellor, but he has come to the penitent's stool in the most arrogant possible way without the humility to admit that he

made mistakes in his diagnosis and in his prescription last year.

Sir W. Smithers: I hope the hon. Gentleman will not think it any discourtesy if I say that I must leave the Chamber because I have a very bad throat. [Interruption.]

Mr. Fienburgh: My hon. Friend the Member for Warrington (Dr. Morgan) is offering his services, although the hon. Member for Orpington almost called my hon. Friend a Communist.
One major diagnosis in the Budget this year relates to the fact that investment in this country has not risen to the extent which was prognosticated by the Chancellor last year, when he gave the first glimmerings that ideas that some of us had been preaching for some time had begun to reach his intelligence. Last year he began to realise that unless there was a major upsurge in investment in productive industry in this country, we would stand no hope of facing the future in any reasonable sort of way.
Having made that tentative diagnosis last year, he gave us his prescription and told us that the way in which to increase productive investment was, in his own words, to look at the Income Tax. He said that a reduction of 6d. in the Income Tax
would represent £45 million of relief on the undistributed profits of companies—a very potent augmentation of the company reserves available for maintenance, innovation, and development, upon which, I trust, it should be spent."—[OFFICIAL REPORT, 14th April, 1954; Vol. 514, c. 60.]
That was his prescription last year. Investment has gone down; the way in which to increase it was by taking 6d. off the standard rate, which would leave £45 million in undistributed company reserves available for investment. At a later point in his Budget Statement he said that the mere fact of giving people with large incomes further income, by a reduction in taxation, would provide them with a surplus which they could direct towards productive investment. There was the prescription. We are entitled to point out that the Chancellor was entirely wrong in his diagnosis.
The Economic Secretary to the Treasury tried to ride off, in an intervention in the speech of one of my hon. Friends, with the suggestion that during


1953 fixed investments in private industry had increased. We can only refer to paragraph 69 in his own Economic Survey for 1954, which covers the whole of 1953. This passage has already been quoted once in the Chamber today and I am sorry to have to do it again, but the Economic Secretary must not be allowed to ride off upon a misunderstanding, a misapprehension and an ignorance of his own Economic Survey. It said:
There was a further increase during 1953 in investment in the basic industries, but investment in private manufacturing industry remained at about the same level as in the previous year in spite of the relaxation of licensing restrictions on factory building and the special measures taken to stimulate investment in the Budget.
If the hon. Gentleman shakes his head, I shall be glad to make way for him to reply and make any point he wishes.

Mr. Maudling: I am sorry to interrupt the hon. Gentleman's speech but he is comparing 1953 as a whole with 1952 as a whole. The point is to compare the position at the end of 1953 with the position at the beginning, which shows a considerable increase in factory building and in the rate of flow of new orders to industry.

Mr. Fienburgh: If the year 1953 as a whole showed no increase over the previous year's rate for the year as a whole there must have been a catastrophic decline at the beginning of 1953. The figure must have been even lower than the terribly low levels which had been achieved in 1952 and which were in no way corrected by the measures introduced in the last Budget. At the end of the paragraph it is admitted that there may not have been time to give these Budgetary methods their full effect. But it says:
So far there are no clear indications of any marked increase in capital expenditure by private industry.
That was not written at the end of 1953, or in January, 1954. It was published in March, 1954, when one-quarter of the year had been on its way. Up to that date there was still no sign of any marked increase in capital expenditure by private industry. In other words, the prescription given by the Chancellor last year as a means of correcting the catastrophic decline in investment was wrong altogether. Certainly £45 million

was left in the hands of private companies. Certainly many people who had large incomes were left in possession of even larger incomes; but neither the increase in the reserves, nor the increased incomes of people who might have been private investors, flowed into private capital investment in this country.
That is a crushing failure of the Chancellor's prescription in his Budget last year. It is a most important failure. I admit that it is very gratifying that production was increased roughly to the level it had under the Socialist Government and that productivity has recovered after the severe decline of the first two years of the right hon. Gentleman's administration. Those are very pleasing factors. But the industrial investment in private industry which would give ensuing generations the tools with which to carry out the job of looking after a nation of this size, was simply not provided during the past year. The whole of the increase went into private consumption.
It is no good anybody arguing that it went into the private consumption of old-age pensioners, people with small fixed incomes and workers on average wages. It went substantially on motor cars. On this subject we recently had one of the most stupid statements ever made from the Treasury Box, which is saying a lot, whichever Government is in power. It said that the price of motor cars had gone down in the secondhand market, and therefore people lower down the income scale were now enjoying private motoring. Believe me, it is not the case that we cannot get around in my constituency in Islington for the old-age pensioners queuing up at the post office in 1939 Ford cars.
However, we did last year put forward some suggestions by which the Chancellor could rectify this severe decline in investment. We suggested that, instead of simply increasing initial allowances to 20 per cent., he should increase them to 40 per cent. He pondered and he havered. We discussed it in Committee and he came firmly to the conclusion that 20 per cent. was just about enough. Again, he has had to confess that what he said last year makes nonsense in terms of results this year, because he has met our point half-way by introducing this new form of investment allowance. I notice


that this allowance is causing some intellectual difficulty to some of my hon. and learned Friends—not those who are barristers, but those of my learned Friends who are professional economists. There is a good deal in common between the professional barrister and the professional economist. They both have in common a pedantry of delivery and an imprecision in counsel which entitles them to be called learned.

Dr. Morgan: What about the doctors?

Mr. Fienburgh: I wish the doctors would be quiet. I am sure there is some medical term for a talkative tongue and I suggest my hon. Friend looks it up in the Library. I really cannot have my speech interrupted by the exit of the hon. Member for Orpington and now have my hon. Friend talking behind me. It is asking too much of those of the younger generation to take so much from those approaching a greater age.
The economists are having some difficulty in making up their minds whether they approve the new investment allowance or whether they would approve the doubling of the initial allowance. From my sub-sub-moronic intellectual level, neither is the proper answer. What we really need—and this was hinted at by the hon. Member for Gloucestershire, South (Mr. Crosland)—are differential initial allowances; that is to say, we should look at an industry as a whole and decide that investment in that industry or the other industry is in accord with the national need, and we should then give the selected industries a higher rate of allowance than in the industries in which we wish to discourage investment. Or we could take a particular function within one particular industry. For example, if we wished to encourage the introduction of fuel saying equipment, we could give a higher initial allowance for that specific purpose.
The difference is, of course, a fundamental one of approach, and I do not expect hon. Gentlemen opposite, or the Chancellor of the Exchequer, to agree with the point I am making. While I agree that he has made some slight concession to the idea of differential initial allowances and differential investment allowances in his Budget, broadly speaking we cannot honestly expect him to go further, because the party opposite

is pledged to the conception of using broad economic and fiscal controls levelled on the economy as a whole, as against our conception of dealing with the economy selectively by investigation, by decision on priorities, and by trying to make up our minds with some degree of precision. On our side of the Committee we would use a varied armoury of economic, fiscal, and material controls in order to direct the economy in the direction we want.
The difference is between the broad-based attack and the selective attack: between one weapon for all purposes—steam hammers to crack nuts as well as to hammer piles—and the selective use of the right weapons for the right job. After all, there should be no misunderstanding of the need for some kind of selective approach. We face in our generation the need for a second industrial revolution, and that will certainly not be achieved by dropping manna from Heaven upon all industries, under the assumption that at least the deserving will get some of it. The much more sensible way is to parcel out the manna to those who have the greatest need.
Even looking back on last year, and giving full credit to the Chancellor for the measures in the last Budget which he took in the hopes of stimulating investment, and anticipating in full that the new measures may bring a much better result, there is something grievously at fault with the structure of our economy. Even if he had done nothing at all in the last Budget, all the conditions were favourable, or should have been on any economic analysis, for an increase in investment by the private will, volition and decision of private, individual capitalists. They ought not to have needed bribery. They ought not to have needed pushing or encouragement, because they had what should have been for them the best possible circumstances in which to invest and expand. But somehow they did not do it.
First of all, they had a Government of their own choice—a Government of businessmen. That should have given the businessmen abounding confidence. The astonishing thing is that with a Conservative Government the industrialists have not rushed to invest, whereas under a Labour Government, and with a high


rate of taxation, the rate of investment was higher than ever before. I would ask the Economic Secretary, who enjoys a reputation for super intellectual integrity, to look at this point and see if there is some linkage of cause and effect.
The industrialists were given their tax remissions and their initial allowances, and there was a great deal of liquidity of reserves from which to carry out investment if they wished. They had full employment and buoyant demand, and there was no sign of inflationary pressures. All these things had occurred by accident, default and partly by design. Every day raw material prices fell, and therefore there was less need to devote assets to inventory and stock. There was slack in the economy, and a reduction in defence expenditure. In every way they had favourable auguries for the encouragement of investment. Apart from that, they had as well the direct incentive of an emergent Japanese and German competition, which not only will put Britain out of a reasonable place in the world, but could push them out of their private profits and private positions in the British economy and industry, unless they do something of their own volition to meet it.
Having directed the Chancellor of the Exchequer reluctantly to the penitential stool on these two points, I must admit that this year he is apparently aware at last of the possible emergence of a United States recession. He gave us his usual homily on the need for exports. Incidentally he again contradicted, by his actions, his protestation of last year. We on this side of the Committee asked last year for further development of the export credit guarantees organisation. What did the Chancellor say:
I have asked those who speak for industry and commerce whether our banking and financial system provides adequate finance for our exporters. On the whole, I believe it does.…"—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 58.]
That was the Chancellor's reply, firmly, with no equivocation.
This year, after we had told him what he would have to do, he comes along, without even the humility to apologise for having misled the Committee last year, and does precisely what we suggested was necessary. That is why I say that his repentance is of a very arrogant

kind which becomes him ill; because this year the Chancellor has had to make further provision for export credit guarantees. It is a very good idea; we are not criticising the action but the fact that it is one year late, and that no one on the other side of the Committee has yet had the grace to say "Thank you" to the wise heads on this side of the Committee who told the Chancellor that sooner or later it would have to be done.
However, the Chancellor has, apart from his usual homily on exports, acknowledged the danger of a United States recession. I wish to relate that to the investment position. The basic industries have maintained and increased their rate of investment. The private sector of industry has failed to increase its rate of investment. What will happen should an American recession develop, and should the slack from the American economy begin to induce a similar slack in this country's economy? What measures will the Chancellor then have to use in order to stimulate the economy?
One measure, of course, and the classical and most effective measure, is an increase in investment. If the American recession progresses, the Chancellor will attempt to secure an even greater increase in investment in this country. But if the private businessmen of Britain were unprepared to invest last year, in reasonable circumstances, what hope has anyone of persuading them to invest next year, or later this year, with an incipient depression looking them in the face and staring at them from their bank balances? The Chancellor of the Exchequer will certainly not be able to do it, and neither bribery nor cajolery will do it.
Then, should that situation arise, the Chancellor of the Exchequer will be eternally grateful to the Labour Government of 1949–50 for bringing into public ownership a very substantial sector of the economy in which he can directly influence the rate of investment. We have always argued that one of the principal cases for the nationalisation of a sector of industry was the fact that it could be used as a lever upon the economy in times of incipient depression. Our major case for nationalisation has never been that it would bring immediate cash benefits to the workers in the industries concerned. Our major case all along has been that public control of a


sector of industry enables the Government of the day effectively to control the economy by direct action and not by exhortation.
If, later this year, there comes, as seems likely, a need for a further stimulus in investment, not just simply to improve efficiency, although, goodness knows, that needs doing, but primarily in order to give a shot in the arm or whatever other portion of the anatomy appeals to my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), it can only be given in the public sector. The Chancellor of the Exchequer will rue the day, economically speaking, when politically he allowed himself to be robbed of the power of investment in the steel industry and the road haulage industry. In fact, his power of protection against a slump and the means for reversing a slump once it begins has been dissipated by the political actions of the Government during the last two years.
This year, therefore, proves in the investment field that it is the public sector of industry, the basic industries in public control, which have responded to the national need, and the private sector of industry which has failed. Accordingly, this year proves Labour's case for the public ownership of a substantial sector of the economy in the investment field. Already this year we have had one after another of the Ministers responsible for the public industries coming to the Dispatch Box and claiming how well those industries have developed in terms of efficiency, economy, price, production and labour relations. Ministers have come to the House and said how spendidly the nationalised industries have done.
There remained only one further point to be proved in order to prove right to the hilt the Socialist case for the public ownership of a large sector of our economy and that was the investment front. This year, in face of the complete failure of the Chancellor in his recipe for a recovery in investment, and in face of the complete failure of the private sector of the economy to invest, the point has also been made that when investment is needed in the economy it can best be provided by the control of a substantial sector of the economy by the Government on behalf of the people.

8.35 p.m.

Mr. Aubrey Jones: Earlier this evening the Member for Stechford (Mr. Roy Jenkins) set an admirable precedent. He modestly ignored the labyrinth of subjects followed in the debate—housing, agriculture and all the rest—and devoted himself to the speech delivered from the opposite Front Bench. I hope that I may be forgiven if I do the same. I should like to follow the theme set by the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) and deal with the two subjects of investment and Estate Duty.
First, I will deal with investment. The hon. Member for Islington, North (Mr. Fienburgh) followed the hon. Member for Stechford in making great play of the fact that under a Labour Administration investment in the private sector had prospered and increased manifold, whereas now under the present Administration there was relative stagnation. It would be very easy if all these economic changes could be attributed merely to changes in Government. The problem is much more complicated.
Until comparatively recently investment in this country benefited in two ways. After the war there began a phase of re-equipment. Industries caught up with war-time arrears. That phase has come to an end. That is one significant change. Secondly, inflation aided investment. That also is over.
One factor which now seems to have badly influenced investment is the uncertainty caused some years ago by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) in withdrawing the initial allowance. Member after Member, and in particular the hon. Member for Islington, North, seems to have underrated the long-term nature of investment. Investment is not a matter of putting in a machine tomorrow. It is something done over a long period of time. It may take years to develop.
Therefore, I should not have expected any very great change in 1953 consequent on what happened in the Budget last year. The difficulty to which, it seems to me, we have come is that investment is now up against two kinds of deterrent. As my hon. Friend the Economic Secretary said, the rate of return necessary for any investment, with taxation at its


present level, has to be very high indeed. The marginal kinds of investment which do not yield that return are not followed.
The second difficulty is the one of uncertainty which I mentioned earlier. My right hon. Friend was unable to reduce the total burden of taxation, and therefore he resorted to this device of the investment allowance. More than one hon. Member yesterday, referring to this investment allowance, appeared to regard it as an innovation and talked of its discriminatory character. I think the hon. Member for Gloucestershire, South (Mr. Crosland) did so, and so did my right hon. Friend the Member for Blackburn, West (Mr. Assheton). Neither of them, it seems to me, brought out the fully innovatory character of this investment allowance.
It has been the tradition of this country to treat different classes of taxpayers in exactly the same manner. We have treated the butcher exactly the same as the baker. Now it seems that we have departed from that tradition. We are giving a tax concession to certain taxpayers—to those who invest in fixed assets—which we do not accord to others, for instance to merchants. I do not complain, my right hon. Friend could not abate the general burden of taxation, but I do not think that we ought to ignore the significance of what he has done. I believe that this allowance will stimulate investment, but on one condition, and that is that it can be counted on to continue as a certainty. The reason that investment has declined is the uncertainty caused in this field of fiscal concessions to investment by the withdrawal of the initial allowance three years ago.
I pass to a different aspect of this question of investment. My hon. Friend the Economic Secretary opened his speech this afternoon by describing our present economic situation as a state of balance. I should like to ask him a question, and I am afraid that in doing so I shall affront the philosophy expressed just now by the hon. Member for Islington, North. I should like to know what is the justification, in a state of balance, for the continued existence of the Capital Issues Committee. The purpose of that body, as I understood it, was to sift the demands for capital resources, to reject the inessential in favour of the essential,

exactly as the hon. Gentleman would like. I accept all that in a state of war. I accept it in a state of inflation because, after all, inflation breeds the inessential and the luxurious. But I do not see its purpose in present day circumstances. I do not see its relevance to the economic situation described in the Economic Survey—a state of liquidity in business, plenty of funds, unused capacity and so forth.
An institution like the Capital Issues Committee seems to me to contain an inherent defect. It is easy for the hon. Member for Islington, North to say that the essential must be weighed against the inessential. But there comes a point when the decision becomes a matter of personal preference. It is entirely arbitrary, and arbitrariness carried to a point can be subversive to the whole rule of law. Arbitrary decisions of this nature beyond which there is no appeal must breed resentment and dissatisfaction. That seems to me to be a defect of the kind of control which the hon. Member for Islington, North wants, and of the Capital Issues Committee, which in the present circumstances I regard as unnecessary.
I now come to the question of Estate Duty. My right hon. Friend the Chancellor was confronted in the field of Estate Duty with exactly the same difficulty as he was confronted with in the field of investment. He was unable to reduce the burden of taxation generally and, therefore, be was driven to devices to ease the shoe where it pinched most. Therefore, we have this concession in the case of family businesses.
The right hon. Member for Bishop Auckland described family businesses as receiving a privilege under this Budget. I agree that it may well seem a privilege, but unless we can affect the general burden of the tax it is very difficult to do otherwise than to ease it for certain classes of persons. I should have preferred a much more fundamental approach. The whole tenor of the speech of the right hon. Member for Bishop Auckland was to the effect that Estate Duty was a very good tax. In an earlier Budget debate, I remember him saying something to the effect that it was a very just and, indeed, satisfactory tax.
I differ from that view. I want to make it clear that I am not quarrelling with the principle of taxation at death. What I challenge is the form which that taxation now takes. Estate Duty, as it now stands, is essentially an impersonal tax. It is a tax not upon a person but upon a piece of property. It cannot be said to be a tax upon the testator, because, in any case, he is dead, and with rates of taxation as they now are he cannot provide for the tax while he is living. It is equally not a tax upon the successor, because it is related not to the size of the inheritance but to the whole volume of the property passing.
From that impersonal nature of the tax all its injustices flow. The most fantastic instance of its injustice is contained in the Report of the Committee of Public Accounts for 1950. In that instance the value of the estate had so depreciated between the moment of death and the moment of inheritance that the heir was left with nothing at all; indeed he was involved in debt, and the Inland Revenue had to make a remission of duty to disentangle him from his difficulties. Nobody can contend that a tax which can lead to an instance like that is in any way just. It is the height of injustice. If we cannot abate the burden of taxation, let us at least see that its incidence is just.
There is a strong case for making the tax at death, at least in part, a tax on the inheritance rather than upon the whole volume of the property passing—in short, to use the words of the experts, to make it in part an acquisition duty rather than a mutation duty. I find this principle affirmed much more eloquently than I could put it in these words:
We now assert the vicious principle of taxing property instead of persons. We try to tax the dead instead of the living. The State refuses to consider for purposes of valuation anything so personal as the sacrifice of the heirs, and bases itself on the mass of the inheritance.
Those words appear in the second volume of the life of his father, written by my right hon. Friend the Prime Minister. I can assure the Committee therefore that my orthodoxy is quite unimpeachable.

Mr. Fienburgh: Not nowadays.

Mr. Jones: I want to make a comment upon the references which have been made by the hon. Member for Islington,

North and the hon. Member for Stechford to the fact that last year's Budget seemed to contain a promise of things to come—a promise not sustained in this Budget. I concede straight away that this is the real weakness of the Budget, but I do not attribute that weakness to any person. It is right to attribute it to the whole system of thought by which Budgets are now constructed.
We have got into the habit of so constructing Budgets as to balance the economy from year to year according to the situation in which it finds itself. Economically, that is probably very right. The Economic Secretary paid lip service to this conception at the outset of his speech, but despite the economic Tightness of the idea, the conception seems to me to be open to very serious defects.
In the first instance, a Chancellor constructing his Budgets on these lines is necessarily short-term in his outlook. He cannot sustain a policy over a series of Budgets. He relates himself from year to year. In the second place, a Chancellor constructing Budgets in this way finds himself, it seems to me, entirely at variance the whole time with the popular mood. When things are bad the Chancellor has to dole out money and be lavish; when things are prosperous, as they seem to be now, he seems relatively austere. No Chancellor, whoever he may be, to whatever party he may belong, can exercise the necessary leadership when he is so circumscribed as he is by this conception. Economically, this method of constructing Budgets may be right, but psychologically it is certainly entirely wrong.
That, I suggest, is the real case for looking at the whole accountancy of industry and for trying to encourage industry to stabilise itself, instead of the Budget's trying to stabilise it always from year to year. That would happen if, for instance, the profits of industry were reckoned with regard to the replacement costs of capital assets rather than with regard to their original cost. Profits would not then be over-stated in times of rising prices or under-stated in times of falling prices. That is a very difficult subject, and I do not wish to enter into it now.
The thought that I wish to leave with the Committee is that surely it is high time that we were sceptical of this


orthodoxy in which my right hon. Friend finds himself imprisoned just as his predecessors were, this orthodoxy which requires every Budget to balance the economy just from year to year and no more.

8.52 p.m.

Mr. Ivor Owen Thomas (The Wrekin): Public opinion generally is that the Government have had about the most difficult week, the worst week, of their existence. Following the display of the Prime Minister on Monday, we have had a Budget speech that is probably the most sterile and barren Budget speech in history. There were great expectations, but the realisation has been very small. Great disappointments have been felt throughout the community. To a very large extent the Government themselves are responsible for this trend in public opinion.
The Economic Secretary today dared to quote from certain sources in proof of what he seemed to be arguing, that there had been general acclamation and praise of the Budget and the general policy the Chancellor outlined. All I can say is that he can be satisfied with very small rations, because anyone who surveys the Press commentary on the Budget speech will be forced to one conclusion, and that is that the Budget has had the most hostile reception of any Budget since the end of the war. There should be no surprise about that, because in the months leading up to the Budget the spokesmen of the Government seem to have induced the public to generate in their minds expectations of something big, something generous and something for everybody. But that something generous, something big and something for everybody is conspicuous by its absence.
If any criticism is to be leveled at the general financial policy of the Government since they came into office, it is that in their earlier proposals and first Budgets they dissipated the assets and misused what they could accumulate in their early period of office. Now, after a year that has been more disappointing than the Government expected, the Chancellor finds that he has almost nothing in the kitty, so those who are waiting must go away empty-handed.
But what the Chancellor has done with what little he had available has been the wrong thing. He has given, not to those in need, but to those who already have sufficient. If the Chancellor, in framing his Financial Statement for guidance on the national economy, has any responsibility of a primary nature, it lies in giving to those of the community who need most the assistance that is available.
What did the Chancellor do 12 months ago, when he did have a surplus to disburse? He gave the main portion to those who already had ample. He gave a reduction of taxation benefiting primarily those who were in receipt of the biggest incomes. If instead he had harboured his resources a little longer, he would have had them available this week to give a little more where it is most needed—to the old-age pensioners and to those dependent upon small fixed incomes, the old-age pensioner before everyone else.
The Chancellor said some sweet words to the old-age pensioners and sent them away empty-handed. Everyone expected that he would at least try to do something for the old-age pensioners. He has done absolutely nothing. He has simply given them pity and sent them away with words. Read any comments from those who are responsible for putting forward the case of the old-age pensioners. There is no doubt about what they think of the Government and of the Chancellor in refusing to help those most in need. Is that surprising? I will leave it to others who can also judge these things for themselves.
Some Government supporters belong to the "treat them rough" school. I read these words in one of yesterday's evening papers:
Mr. Assheton gave his opinion of the Budget: 'Disappointing'.
And then further down someone else said these words:
When I was younger I had a slogan: Treat them mean and make them keen.
Who said those words? Is any hon. Member opposite prepared to guess? Would they be surprised to know that those words were spoken by a member of the Government? Those words are reported in the "Evening Standard" as having been stated by the present Minister of Works, who also said:
 It served me well. I think it is also true politically. The British people don't want to be nambie-pambied. I think most People approve of the Budget.


Incidentally, it goes on to say that he was one of the few men who wore a butterfly collar with his dinner jacket.
The Government have certainly treated the old-age pensioners meanly. Prices have gone up and the cost of living has continued to increase. The income of the old-age pensioners has remained at its previous level and there has been no adjustment for them. Any adjustment which the Government have made has been to the advantage of those with the higher incomes. Last year's Budget gave millions of pounds away in the form of relief of Income Tax to those favoured few who are already in receipt of more than enough for their personal requirements. The contention was that in doing that it would give a spurt to investment. Has that happened? Hon. Members should read the Economic Survey, and they will see that the increase in investment had not covered in any way the total amount of relief given in last year's Budget.
One of the complaints of the Government and of all economists is that not enough investment or new capital is going into industry. As was rightly said by my hon. Friend the Member for Islington, North (Mr. Fienburgh), in this country since the war the main investment has been made by the boards running the publicly-owned industries. If we deducted the total of investment for which those public bodies have been responsible over the last few years from the total investment made, there would be only a small amount remaining to the credit of private capital in industry.
And so the sorry tale goes on. The people of this country can judge properly the ability and consistency of members of Governments. I make this prophecy, that if the Government dare to go to the country within the next 12 months they will be thrown out head over heels. The people of this country elected this Government, admittedly with only a small majority, on the understanding that they had a programme, that they would set the people free, that they would make the people prosperous. Have they had a programme? Have they set the people free? Have they made them more prosperous? Have they put into operation their great economic programme? No, all they have done has been to remove whatever principles of guidance

and planning had already been put into the national economy by the Labour Government between 1945 and 1950.
What is the argument? They say they want to take steps to place this country in a position in which it will be able to face what they call a recession. That is another word for mass unemployment caused by a falling off in effective demand. It is a condition in which there is plenty of wealth but no effective distribution. Where does recession come from? Recession, mass unemployment, does not occur in a planned economy. And when this Government talk about the danger of a recession, where do they look? To the United States of America, to the biggest single private capital economy in the world. Because of the complete lack of control in that American economy, they are afraid that any recession, any falling off of demand, will have its inevitable effect on the economy and prosperity of this country.
So what do they do? Do they plan, do they prepare for it? No, they throw away all the controls they can, and they try to revert to what they call a free economy. If that American recession comes, ultimately they will find themselves in the same position as this country was in 1931 when there was still a capitalist economy here, even though there was a minority Labour Government.
We listened to the hon. Gentleman the Member for Orpington (Sir W. Smithers) churning out his usual stuff about half an hour ago. The hon. Gentleman seemed to be arguing that, if we were in the same economic and political situation as we were 50 years ago, everything in the garden would be lovely, and that all we want is a succession of Tory majority Governments which, sooner or later, will establish conditions that will give prosperity to everyone in the country. What a lot of mental rubbish. If we do not have planning in a household, ultimately we come to ruin, and if we do not have planning and some idea of what we are trying to do in a national economy, consciously led by a Government with ideas on the matter, we come inevitably to recession—to mass unemployment.
We on this side of the Committee do not wish to see the people of this country again go through the hell of depres-


sion, which was their lot in the years between the two wars and before. The sooner the Government give the electorate another opportunity to decide how it wishes to be governed, the better for the country and the world as a whole. I have no doubt that when they take that step we shall have another Labour majority Government in control of the destinies of this country.

9.12 p.m.

Mr. Hamilton Kerr: During the course of the debate a number of hon. Members have concentrated their criticisms of the Budget under two headings, firstly the position of old-age pensioners and, secondly, investment in the private sector of industry. I wish to concentrate on the first point.
I wonder how many hon. Members in this House now remember the late Sir Austen Chamberlain, who used to sit on the third bench below the Gangway, a figure of Edwardian elegance with his monocle and orchid, raising his silk hat to any hon. Member who referred to him in the course of the debate. As Foreign Secretary he had made his reputation as one of the architects of the Locarno Pact, and as a backbencher he had made many contributions on foreign matters.
I remember one speech he made which deeply moved me. He talked of the dark houses and darker streets in the industrial slums of his constituency in Birmingham, of the plight of the old people and those long high stone stairs many had to climb, perhaps never to come down again. I, as many other hon. Members, was deeply moved by that speech and, from that time I have been personally interested in the old problem of an ageing population. I believe it has a social and an economic aspect, socially, because the worst part of old age, we find by talking to friends, is not illness or failing strength, but often loneliness. In my constituency of Cambridge we have tried to organise as many social clubs as we can and to build a housing project for old people. Quite frankly, that only touches the fringes of the problem, and more will have to be done.
Economically, the problem is that we find ourselves belonging to a nation where there is an increasing group of old people who have to be sustained by a stable working population. How are

we to get over that? Much as we would like to help—and I am certain the Chancellor would like to help—the old people, I believe we shall not solve the problem by tackling it piecemeal. We want a considered policy. I suggest that it might be wise for Her Majesty's Government to join in conversations with the trade unions and the Federation of British Industries to work out a plan for the coming years to deal with our ageing population, to give them a decent life and, wherever possible, to allow them to remain working at light jobs in industry.
Having said that, I hope that the Committee will not consider that I am raising a frivolous subject. My first concern is that the Budget debate has been quiet, and my second, my project would only cost the Chancellor a few thousand pounds. During recent years we have begun to do something to preserve our ancient monuments and fine country houses. I believe something like three-quarters of a million may be devoted annually to that project. But there is one aspect of our heritage, a small one which has hitherto been ignored. I refer to the windmills over the countryside. I am told that in the Norfolk Broads over 100 years ago there were nearly 1,000 windmills, drainage mills and corn grinding mills. In those days, I suppose it was a beautiful sight to anyone living on the Broads to see the sails of the windmills moving against the vast spaces of the sky and the sails of the wherries moving majestically along the water. Today, of those 1,000 mills only about 20 remain in the whole country.
One of the features of the gradual disappearance of windmills was the Drainage Act of 1930, whereby power-driven mills received a grant from the Ministry but not wind-driven mills. Ever since that period the windmill section of the Society of the Protection of Ancient Buildings has done its best to protect them. Today we find that charming feature of our countryside disappearing from the great holiday areas such as the Broads is. I am told that about 300,000 tourists come there every year, and it is fast losing its distinctive characteristics.
In Holland there is a different story, and my proposition centres round the Dutch plan. In Holland no less than about 1,100 to 1,200 mills are preserved and form a charming feature of the


countryside. I believe that the organisation primarily responsible for them is known as the Hollandishe Molen, or Dutch Mills, which receive a small grant of £5,000 only a year from the Dutch Government. When a mill is in need of repair the Dutch Mill organisation seeks the permission of the Dutch Minister of Education, Arts and Science for repairs to be undertaken. The central fund provides something like 25 per cent. to 35 per cent. of the cost; the mill organisation provides 10 per cent. and the guilds and cities organisation—an organisation for the preservation of national antiquities—provides another 10 per cent. and the rest is found by the miller. Thus we have a charming feature successfully preserved. I believe that is a reproach to this country.
I wish to make three suggestions. Would it be possible for my right hon. Friend to consider the granting of a few thousand pounds to any form of organisation which would help to restore these mills to good order? Secondly, to consider the emendation of the Drainage Act so that wind-driven mills receive the same grant as power-driven mills; and thirdly, that local authorities wherever possible should be urged to undertake the restoration and maintenance of these fascinating old mills. Perhaps the Economic Secretary may be able to give this matter consideration.

9.18 p.m.

Mr. Jack Jones: When the hon. Member for Cambridge (Mr. Hamilton Kerr) commenced to talk about mills, I was reminded of the stones that are reputed to grind the faces of the poor.
The Tory Party have let me down in my opinion of them. I hate their guts politically, but I thought they were human. Recently, where I live, we opened the second hall for pensioners which I have organised and which has been built by voluntary labour in the last four years. We have been assisted by many industrialists, including Tories, to whom I give credit. Last Sunday was the occasion of the first annual meeting and one item on the agenda was the rate of contribution to be paid. Previously it had been Is. a year, or Id. a month. I said that we could raise the contribution quite comfortably, because this Government were bound to give the pensioners

something. That was my candid and honest conviction. I am afraid that next Sunday I shall have to go back and move the rescinding of that motion now in the minute book. I have been sadly and badly let down in my opinion of people whom I considered to be persons possessing at least a humanitarian, Christian decency.
I know the difficulties of the difference between what is morally desirable and what is financially practicable, and I know that the Chancellor will make a case that the country cannot afford it. Let us have a look at what this Government have been up to in the last few months. Yesterday, we had a practical speech from an eminent industrialist, the hon. Member for Harrow, West (Sir A. Braithwaite). He is the chairman of the British Constructional Engineering Association, and he knows something about what this country's problems are; and the Chancellor, who is no fool, also knows what this country's problems are. The principal problem is that of finding orders, particularly in the major engineering industries, in competition with our German, Japanese, Belgian, American and other competitors, and thus to bring into the country an increased income.
As an ordinary practical fellow who has had something to do with the stuff which goes into engineering products, I ask the Committee to look at the situation. The hon. Member for Harrow, West bitterly complained, as did an hon. Member speaking for the shipping industries, about the difficulties of getting orders and about being under-cut in price. Why are we meeting difficulty in obtaining orders? It is because of price, not because of lack of skill or lack of quality.
I make no bones about this: Britain still possesses individually the finest engineering craftsmen in the whole wide world. Do not let us make any mistake about that. But the individual skill of the British craftsman is of no avail if he puts his skill and time and energy into a piece of steel which is costing his employer more than it ought to cost him.
What have the Government done? What have these people, who are talking about needing the basic commodity of engineering—steel—done with the steel industry? Let us consider my own constituency, where there are two very fine steelworks—two of the best in Britain.


As a boy I worked for one company which is still owned by the nation, and my father before me sweated and slaved with that company. The other company, part of a fine steel organisation—United Steel—was the first to be sold to so-called private enterprise. We find the same workmen, the same raw materials, the same capacity, the same premises—the same everything except that they now have a vested interest which intends to take out of the industry not less than 4 per cent. more than it could take out under nationalisation—altogether £4 10s. per £100 of profit made.
That money will not be swept up in the streets of my constituency. Somebody has to make it, and it can be paid out only at the expense of three things. It can be paid out at the expense of less money to be ploughed back into the industry to create the efficiency about which the Tory Party talk so glibly; or it can be made through lower wages for those who are in the industry—which they would not accept under any circumstances; or it could be made by increasing prices.
Those are the only ways in which this increased dividend can be paid. Let us consider the average selling price of these commodities—just about £20 a ton. For every five tons, every £100 worth of material and £100 of profit, one company has to find at least £4 10s. more than the other. The companies are supposed to be in competition with each other. Let us suppose that the company still in the possession of the Agency wished to compete with the nationalised industry and was now finding £4 10s. per £100 profit more than—

Mr. Douglas Glover: I know that the hon. Member wants to be fair. The 4 per cent. is on the capital of the industry, not on the turnover. The hon. Member is trying to base it on the turnover. It is on the capital charge, not on the turnover.

Mr. Jones: The fact is that £4 10s. per £100 involved now goes to remote investors that used not to go, and somebody has to find it. I am proving that there is less money available. I am no financier. At one time I had great difficulty in making the dole go round a family of kids. I became a specialist in the job. If we are not careful, there will

be many more specialists doing the same job.
The Chancellor has told the country that more money must be ploughed back into industry so as to provide new machinery to put industry into a position to compete, yet hundreds of thousands of pounds will be paid out to remote investors more than need to be paid, and all the jiggery-pokery about how and why it happens does not concern me one bit. All I know is that it really does. The Government have themselves to blame for this situation.
Of the two works I mentioned, one is in a more favourable position than the other because it has to provide less profit, but can it reduce its prices of steel to potential customers? No, because the price of steel, both in the denationalised section and in the publicly-owned section is pooled and controlled by Steel House. Companies which would try to bring down their prices are not allowed to do so. Yet we are crying out that Germany is undercutting us. This is a shocking indictment of the Government's policy. The Government dig their own pit, and when they find themselves bogged down in it they moan about the situation.
I claim no credit for the fact that the public sector of the industry has put an enormous amount of money into public utilities. What would we expect? The robbers in the past took the swag and walked out with the best coal and the most easily worked seams. They left the countryside in a mess and walked away with the cream. We expected that a tremendous amount of capital investment would be needed, and unless there had been that capital investment there would have been no coal.

Sir William Darling: What was this capital investment to which the hon. Gentleman refers? Was it not done with taxpayers' money?

Mr. Jones: Of course it is taxpayers' money, and it is taxpayers' coal.
The earth is the Lord's, and the fullness thereof; the world, and they that dwell therein.
That means Lord spiritual and not the hon. Member for Edinburgh, South's conception, lords physical. The wrong lords got hold of it. The same happened with the iron ore. This capital


investment has been very necessary so as to create a situation in which the sons of the miners of the past will go into this industry. People should not moan about money being invested in coal, for without it the country would be at a standstill. It took the Tories a long time to realise that bags of coal are more important than bags of gold. I see that bags of gold are being buried in Texas, although we cannot get enough coal in Britain.
How long do the Government expect the workers of Britain to remain quiescent when they see what is going on in the engineering industry? I do not know. The Government have suddenly discovered the facts of life and that making promises at election time is one thing and carrying them out in between is another.
I want to say in no uncertain terms that if they want economic stability they must ask of themselves exactly what they are asking of the workers. If the Chancellor of the Exchequer had come out with an absolute limitation on profits and stopped the army of investors walking off with money they have not earned, and had given the old-age pensioners a little more, he would have received less odium than he has received this week and will now continue to receive.

9.31 p.m.

Mr. Harold Wilson: At any rate the Chancellor of the Exchequer has taxed the ingenuity of those who have spoken yesterday and today to find something new to say about the Budget. We have had one or two original contributions from hon. Gentlemen opposite. The hon. Member for Cambridge (Mr. Hamilton Kerr) made a most agreeably short speech about windmills, and there was the annual event by the hon. Gentleman the Member for Orpington (Sir W. Smithers), whose performance tonight was extremely distinguished. Most of us feel that the hon. Gentleman has the honesty to say what many Members of his party dare not say.
On the Budget proposals, about which much has been said during the last two days, I have little to add to what has been said from this side. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and a number of my hon. Friends who have spoken today have

dealt more than adequately with the problem of old-age pensioners, and a number of my hon. Friends have referred to the equivocation of the Government about equal pay. As far as the general taxation proposals are concerned, as my right hon. Friend said fairly yesterday, we have been debating last year's and not this year's Budget because that Budget set the pattern for this year's "carry-on" Budget.
Taking the two Budgets together, it seems that the Government have carried out faithfully the precept of the right hon. Gentleman the Financial Secretary to the Treasury when he said last year, and I do not quote his exact words, that if the Chancellor of the Exchequer has a lot of money to give away it does not matter who gets it so long as it goes to the right people, and that is the point which the Chancellor of the Exchequer made in these last two Budgets.
I feel that it is necessary to emphasise what has been said from this side of the House about Government expenditure, particularly what was said by my right hon. Friend the Member for Leeds, South. After all, we remember at the last Election a speech by the right hon. Gentleman, who is now the Minister of Works, at Chippenham, I think it was, which attracted so much attention and was so popular that the Prime Minister actually ordered a large number of copies and had it circulated to every constituency by the Conservative Central Office. The burden of that speech was a simple proposal that Government expenditure could, and would, be cut by £600 million a year. Once that was done it would release industry from bondage, make possible sweeping reductions in taxation and a generous increase in the value of the social services.
If one looks at the figures since the Government took office, we find that in the year that the right hon. Gentleman was making that speech expenditure was £4,120 million. Now in the year for which we are budgeting, the figure is £4,532 million, on a comparable basis. In fact, instead of the decrease of £600 million which was promised at the Election as going to be easy to achieve, there has been an increase in Government expenditure of £400 million. We might expect, in those circumstances, that the Minister of Works,


bitterly frustrated at the failure of his right hpn. Friend to make these cuts in expenditure would wish to resign from a Government which had so badly let him down. Apparently not.
Apparently the right hon. Gentleman is defending the Government with these new slogans, or the revival of old slogans, with which he has delighted the Press. I think it was my hon. Friend the Member for The Wrekin (Mr. I. O. Thomas) who referred today to the incident when the right hon. Gentleman the Minister of Works spoke to some reporter. It was at a private party at which one understands the hospitality of the hon. Member for Maidstone (Sir A. Bossom) was pretty generous. Whatever the circumstances, the slogan of the Minister of Works as a basis for Budget policy was "Treat them mean and make them keen."
There is frankness about Budget policy. It is the statement of a typical Tory Bourbon, who listens to what is said about the old-age pensioners, and says, "After all, if they cannot afford bread, let them eat cake." If anyone on this side of the Committee, or any Minister in the previous Government—Sir Stafford Cripps or my right hon. Friends the Members for Bishop Auckland (Mr. Dalton) and Ebbw Vale (Mr. Bevan)—had made such a comment on a Budget, that label would have been tied round his neck by the Tory Press for the rest of his life. I have no doubt that the Press will not oblige in similar fashion in the case of the Minister of Works.
Turning from the Budget proposals to the economic background to them, as did the Economic Secretary today, we have—it was the central theme of the speeches of the Chancellor and the Economic Secretary—this perennial legend, this myth of recovery which the present Government claim to have achieved from the state of affairs which they claim to have inherited. We get this statement so often from hon. Members opposite. In fact, I must apologise to the hon. Member for Ormskirk (Mr. Glover). I remember his Election address at Ormskirk last November, and the wonderful story of how, when the Government came into office, our gold and dollar reserves were running out at the rate of £1,000 million a year. and how, because of the beneficent activities of the Chancellor of the Exchequer,

all that has been stopped and we have now achieved full recovery. I hope that the hon. Member will tell the House how it was done; he made many powerful speeches in Ormskirk last year.
One has only to look at the figures. It is a little difficult to find out what happened in 1951. Every time the Government issue a new White Paper the figures of what happened in that year change again, sometimes by as much as £200 million or £300 million at a time. Taking what I think are the last published figures of the Government about 1951, we find the statement that during that very difficult year, under the Labour Government, stocks in this country rose by £610 million. It is the common experience of every housewife that if she stocks up the larder her purse does not look quite so good as a result.
The present Government last year, again on their own figures, which no doubt will change from tune to time, added to our stocks by only £170 million, so that explains a difference of about £440 million on the actual finances of the two years, comparing 1953 with 1951. Looking at the figures now, we find a striking confirmation of what many of us said at the time, that what was really happening towards the end of 1951 was very largely a crisis of speculation. It was a movement of capital out of the country on a temporary basis.
I remember a debate we had on 30th January, 1952, when the Chancellor was in a mood of extreme panic. I remember saying in a speech in the House that he ought not to panic quite so much because the explanation was largely speculative and that if there was a change in feeling about these things then the money would start flowing back into the country at a remarkable rate. I said that all these things had happened before.
There is also the question of the terms of trade which have been mentioned so often today. There has been an improvement over the two years of something like 17 per cent. That is worth at least £600 million a year on our export-import figures. In fact, if we add that £600 million to the £440 million saved on stocks, we have saved the whole of the £1,000 million at once.
The Economic Secretary to the Treasury tried to convince the Committee and himself that the Government


could claim some credit for the improvement in the terms of trade. He started pitching some long yarn about the removal of controls and said that that was bringing world prices down, or at least bringing import prices down. I suppose that probably he believes it.
Then he said that it was wiping out the premium on non-dollar commodities, and all the rest of it. Of course, all over the world the premium on non-dollar commodities has been wiped out by the fact that there are more goods available. It has nothing to do with the action of the Government. The main commodity the President of the Board of Trade has released—or tried to release, because he is not clear whether he had the legal authority or not—was raw cotton, and the price of raw cotton has gone up. World movements generally have had nothing whatever to do with the activities of the Government.
Then we get all the claims about the improvement in the gold and dollar balance. I was surprised at the Chancellor on Tuesday when he actually started getting enthusiastic about the performance in March. Admittedly, it was the best month they have had for about 12 months. In the middle of his speech the right hon. Gentleman started talking about the big improvement in our gold and dollar reserves.
Of course, he did not mention that a ship with an unpronounceable name moored in the Thames on 27th March bearing large quantities of gold from the Soviet Union, and that the previous shipments of gold from the Soviet Union in the last three months of last year had a very big impact on our gold and dollar reserves. Our gold and dollar reserves at 30th September were £880 million, and at 30th March they were £959 million, an improvement of over £70 million in six months. I understand that between £50 million and £60 million of Soviet gold has come in during that period.

Mr. Maudling: And during that period 180 million dollars worth of gold was paid out in service on the American loan.

Mr. Wilson: I will come to that. I do not know what aid has come in during that period from America. If the hon. Gentleman wishes to take items of that kind, there are a number of others

which could be mentioned and which could be equally relevant. I was saying that, during this six months, whereas the Government claimed an increase of £71 million in reserves, between £50 million and £60 million was due to shipments of gold from the Soviet Union.
We cannot get figures from the Government about that. They said that they cannot tell us the figures of gold coming in from the Soviet Union or any other country; and that is why we have lo tell them. We can understand that it is very convenient for the hon. Gentleman not to have to give these figures. I can imagine how embarrassing it would be for him or his right hon. Friend to have to explain to the dames of the Primrose League that this Government were being kept afloat with Red gold.
The other thing the Chancellor spoke about was the increase in production by 6 per cent. My right hon. Friend the Member for Leeds, South dealt with that claim in his speech yesterday. Let us consider what happened to that 6 per cent. It represents, in terms of national income, about £800 million. Where did it all go to? Some of it went to personal consumption, and the Government take credit for that. They take great pride in it. Of course, once again we have different views on the two sides of the Committee about which sections of the population were able to enjoy that increased consumption.
The hon. Gentleman this afternoon was talking about rationing and how the Government have removed it. If one looks at one of the elements of this personal consumption—clothing and footwear—one finds that, at constant prices last year, with this great increase in personal consumption, with all this happiness, joy and freedom of choice and all the rest of it, the total consumption of clothing and footwear in this country was about 1 per cent. above the figure for the last full year of clothes rationing under the Labour Government. That is the only improvement that they managed to get—1 per cent. above the last full year of clothes rationing.
The hon. Gentleman and a number of hon. Members have many times misrepresented our position on the subject of rationing. Many of the things that the Government have derationed had we would have derationed had we been in power, because there has been a steady improve-


ment in the world supplies of these commodities. Many of these things are due to long-term contracts placed by ourselves. The improvement in sugar imports, for instance, is due very largely to what we did in our colonial sugar purchasing and our long-term contracts with the West Indies and other places. What we would not have done is what the Government have done—namely, to put up prices first and put the goods out of the reach of a lot of the people, and then take advantage of it to remove rationing. That is the difference between the two parties.
Of this £800 million, I think it has been roughly estimated that about two-fifths went to increased personal consumption last year—personal consumption by some people, at any rate. About one-quarter went to what the Economic Survey called fixed investment, but in this case almost entirely explained by housing and the investment policies of the nationalised industries. About one-fifth went to increase in working stocks—I have given figures of that—and practically the whole of the rest went to defence.
In fact, if one looks at these figures and studies the Chancellor's speech of two days ago, one sees what a big impact on our economic situation the present defence expenditure has. The Prime Minister was quite right a few weeks ago when he referred to the Chancellor as caught between the pincers of defence expenditure and social service expenditure. One could see the Chancellor wriggling in those pincers in his speech two days ago. So far, it would appear from what he said that, defence expenditure being what it is at the present time, it is the social services which are suffering, and this is expressed in the burden falling on the old-age pensioners.
It seemed from one or two of the remarks of the Chancellor as though he were beginning to be moved by the arguments put forward by my right hon. Friend the Leader of the Opposition and other speakers on this side in the recent defence debate. During that debate we were given to understand by the Government that we had better get used to the idea of an expenditure of about £1,600 million or £1,700 million, year in and year out, for some time to come. That was the expenditure pattern for the long

haul and all the rest of it. It sounds as though the Chancellor, at any rate, has begun to recognise that there is a very big change in the defence situation and that he is ready to contemplate some reduction in it next year.
Of course, he did not tell us about overseas Government expenditure. He did not say very much about what was expected to happen next year in relation to overseas military expenditure. That would have taken us a long way into the question of foreign policy, no doubt. He did not tell us how much was being set aside as the amount that would be likely to be required if German rearmament came into force this year, and all the rest of it. That is where the £800 million went.
If we look, as my hon. Friends have said, at the two major priorities which formed the central theme of the Chancellor's speech a year ago—namely, exports and investment—we find, to use the words of the "Economist" last week, that those two, the most important sections of the British economy, were last year's two Cinderellas. They will continue to be the Cinderellas of the Government's policy.
Let us look at exports for a moment. The figures show a slight rise compared with 1952, but everyone recognises that was the worst year for exports for a long time. It was the year when exports fell for the first time since the war. In 1953 our exports, in volume, were still some 3 or 4 per cent. below the figures we handed over to the right hon. Gentleman in 1951. If we look at Table 4 of the Economic Survey, we find some rather disturbing things about exports. Last year our export of metals and engineering products fell from £1,321 million to £1,303 million, yet those figures include a big increase in aircraft exports, to which" the Economic Survey draws attention.
Excluding aircraft exports from the figures, we find that the total exports of engineering goods last year fell by £39 million, or 3 percent. As everyone in the Committee has been saying, these are the goods which the world wants more than anything else. Other countries are gearing themselves and redeploying their industries in such a way that they can supply the needs of the world in engineering goods, but we are not doing so.
Turning to textiles and clothing, during the rather protracted debates we had in Standing Committee on the Cotton Bill, I remember the President of the Board of Trade telling us that some changes in exports were due to the wise and constructive help which the Government had given to the textile export trade last year. He did not seem to realise that there had not been any real improvement in textile exports last year. The table shows that our exports last year were £383 million, compared with £381 million in 1952—the year of the world textile slump—and £539 million in 1951.
The Economic Survey makes it clear that our total export figures would have been a good deal lower if it were not for aircraft, arms and munitions. Our dwindling export trade is becoming increasingly dependent on the shipment of military goods. I am not going into the strategic, political or military aspects of that situation, but it is right to warn the right hon. Gentleman that exports of that kind are highly vulnerable to changes in world politics and in American policy. One notices the cut announced this morning in American military aid to Europe. It would be very dangerous if we ever came to feel that we had an economic vested interest, however remote, in the continuance of the cold war, and that it would be economically bad for us if these shipments of munitions were to fall. The economy of this country will certainly be on a sounder basis when, instead of having to ship munitions and weapons of destruction as part of the export trade, we can rely upon goods which can be used for development and construction.
Another item of interest is the increase in shipments of oil. This is a further inheritance which the Government received from the work of the previous Labour Administration. It is one more case where this Government are reaping where we sowed.

Mr. Maudling: It is not a nationalised industry.

Mr. Wilson: I am not talking about nationalised industries. I am referring to the fact that the Labour Government found it necessary to divert heavy resources to build up an industry. That is why more resources were not available for housing. We had to divert our resources to the steel industry, to the chemical industry, which had to be

greatly expanded in size, and also to electric power generation. The Conservatives now go round the country saying, "We have had a hard winter, but no power cuts." They are able to do so because the Labour Government devoted the nation's resources to building power stations.
The hon. Member for Louth (Mr. Osborne) has been getting excited about our investment in the coalmining industry. He does not seem to realise that in that industry it takes five, 10 or 15 years for the effect of investments to show itself. Again, a great deal of resources were devoted to oil and we are importing far less American refined petroleum than we were in 1938, even though we are consuming so much more petroleum. We exported 11 million gallons in 1938 and 1,832 million gallons in 1953, a tremendous increase. It is a measure of the resources poured into that industry. One may mention, too, carbon black and what we have done to reduce our dependence on imports of that. Moreover, despite the fact that we are making more sulphuric acid now, we imported only £16 million worth of sulphur compared with £36½ million in 1950 because of the programme we instituted in 1950 and 1951.
I shall not go into the question of investment because it has been dealt with by my hon. Friends, but if one looks at the Economic Survey one finds that production in the key engineering industry was less last year than in 1951. If one includes cars it was up by about £100 million, but for the rest it was down. Defence production accounted for £205 million more last year than in 1951, passenger cars for the home market £90 million more than in 1951; but exports of engineering goods were £85 million down and investment on capital equipment for the engineering industry was £30 million down.
It is because of these facts that we on this side of the Committee deny the claim of the Government that the economy is stronger now than it was when they took office. There may be financial improvements, but the financial improvements are in no way due to the activities of the Government. Economically and basically we are a great deal weaker than when the Government took office. The Economic Secretary takes credit for the good luck


he has had in international economic affairs and hopes that it will be kept up. He is like a gambler who has made one lucky throw and then makes another and then thinks that it is bound to happen every time. We have to remind the hon. Gentleman and his right hon. Friend that they are not gambling with their own money but with the welfare and the jobs of millions of people.
The Chancellor is obviously worried about the American recession. So far he has had good fortune in seeing the recession proceed for some months with no serious effects on this country—for a number of reasons, some of which the hon. Gentleman fairly mentioned today. I think that the main one was that no speculative position had developed in America before the recession began, and there was no run down of stocks and no collapse of primary prices as in 1949 and 1951. The reason for this, however, has nothing to do with the Government. It is altogether due to a change in the United States themselves, and I think the hon. Gentleman has been cashing in on a very fortunate and valuable change rather than the American Government's policy as regards synthetic rubber.
So far the recession has proceeded with no speculative run against sterling. If the recession continues, at least let us hope that it will continue that way. Whether it will continue in that way none of us can say. Anyone who tries to forecast the future of the American recession is guessing. Perhaps as good a guess as any I have heard recently is that it will, as the Americans say, "saucer out," improve in the next few weeks, and worsen again in the autumn. I do not know. Certainly the hon. Gentleman cannot count on his luck continuing. So far the

Government's luck has held very well indeed, but if a chill breeze does blow from across the Atlantic, as it may, we shall find our economic recovery of which the Government are boasting collapse like a pack of cards, and we shall see this Government go with it.
Whereupon, Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again,"—[Mr. Legh]—put, and agreed to.
Committee report Progress; to sit again Tomorrow.

Orders of the Day — FINANCE (POST-WAR REFUNDS OF INCOME TAX)

Considered in Committee under Standing Order No. 84 (Money Committees).—[Queen's Recommendation signified]

[Sir CHARLES MACANDREW in the Chair]

Resolved,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise—

(a) the issue out of the Consolidated Fund of any sums required for paying any postwar credit for income tax of which a person would be entitled but for his death or bankruptcy to claim payment under section twenty-six of the Finance Act, 1946, as amended, to the person for the time being entitled to the credit (but so that payment shall not be made to a person whose title depends on an assignment or charge made after the sixth day of April, nineteen hundred and fifty-four, and not made either to give effect to an agreement entered into before that date or in favour of a person taking property or an interest in property under the will or intestacy, or a creditor of the estate, of the person whose personal representatives make it);
(b) the borrowing of money under the National Loans Act. 1939, for the purpose of providing the sums so issued.

—[Mr. Maudling.]

Resolution to be reported Tomorrow.

Orders of the Day — GLOVE INDUSTRY

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Legh.]

10.1 p.m.

Mr. John Peyton: In raising the question of the import of gloves into the United Kingdom, I should like to make it clear to my right hon. Friend the Minister of State, Board of Trade, and to the Government that neither I nor the industry are looking to him for a decision which would violate the essential principles of Imperial Preference; nor, I stress, are we looking for a quick reply from him. We are asking very much more—that this matter should receive his mature consideration and that of the Government at a high level, because an important principle is involved.
I am not seeking to raise the question of imports from Japan. As the House knows and as my right hon. Friend is well aware, the amount involved is only small. Some £300,000 worth of apparel is due to be imported under the recent agreement, and it would be most unreasonable to assume that more than a small proportion of this figure should be represented by gloves.
In leaving the question of the Japanese agreement, I simply ask my right hon. Friend for two assurances on behalf of the industry throughout this country: first, that the quota of £300,000 worth of apparel should be carefully supervised and in no event exceeded; and second, whether this is the thin edge of the wedge. I prefer to believe that it is not the thin edge of the wedge, but I ask my right hon. Friend for the assurance that this is so and that next year the industry will not be faced with a position that is far more menacing.
I seek tonight to express far more concern on the much more serious problem of imports from Hong Kong. It is quite different from the case of imports of gloves from Japan. Goods from Hong Kong come into the United Kingdom hampered neither by tariffs nor by quotas, enjoying the full privileges of Imperial Preference. I ask my right hon. Friend to have a good look at the problem, first, to ensure that the privileges of Imperial Preference are extended only to

those for whom they were intended, and second, whether the present proportion of manufacturing costs to qualify for Imperial Preference is high enough.
At this point I should like to call the attention of the House to one of the last sentences in a letter—I will not at this stage divulge the contents—written from Hong Kong:
We may add we can easily obtain all the export papers, such as export licenses and Imperial Preference certificates.
I have no detailed information on this subject, but I am saying to the Minister tonight that this is not a matter which can easily be dismissed. If Imperial Preference is to work for those privileged to use it, as I believe is right, and is extended all over the globe, at least it is vitally important that Her Majesty's Government should take every precaution open to them to see that it does not become a racket whereby cheap Chinese goods can be imported into this country. I want to turn to a written answer which was recently given by the Minister of State, Board of Trade to the hon. Member for Leicester, North-West (Mr. Janner) in which it was stated that in 1953 some 154,058 dozen woollen gloves were imported into this country from the Far East. I take the liberty of assuming that those gloves were imported entirely from Hong Kong.
There is an interesting point here. I understand that these gloves were first offered, at least in substantial quantities, in March, 1953. It was, therefore, very surprising that so large a quantity should have been imported during those 12 months, because by March of any year the majority of orders have already been placed.
In March of last year orders had, in fact, been placed to cover the requirements for the home market. It was only because of a subsequent event that these extra cheap gloves were offered to the home market from Hong Kong. I would say that the figure of 154,058 dozen was a very substantial one in the circumstances. The United Kingdom—and I should mention this in order to get the proportions clear—production of woollen gloves per annum is about 800,000 dozen.
It remains for me to say that on this question of woollen gloves if there should be an equally steep rise either this year or in another year in the import of


woollen gloves from Hong Kong, it would be a very serious threat to home industry. I want to make it perfectly clear that the glove industry of the United Kingdom is in no way frightened of fair competition. It is perfectly well able to look after any threat of that kind, but there are certain provisos in that connection.
The first is that the competition should come from countries where a similar standard of living is enjoyed; secondly, that the competition should come from countries which, though they may not suffer from the monstrous level of taxation here, at least are suffering more or less similarly; and lastly, that the competition should come from countries where the wage levels are comparable, even remotely. In Hong Kong a 60-hour week is worked and the wages are a quarter of those paid here. I ask my right hon. Friend, how can a home industry compete in those circumstances?
Very much the same conditions and considerations apply to fabric gloves. I have on the bench beside me a fabric glove imported from Hong Kong which I intend to present to the Minister after the debate. My right hon. Friend will notice that it is shaped not unlike a gauntlet. I am not saying anything about its quality. I asked somebody to put it on this afternoon and the result was not altogether favourable to the glove concerned. I am saying, however, that the imported cost of this glove, manufactured in Hong Kong, delivered to the wholesaler in this country, is 30s. 2d. per dozen. The cost of the labour alone for manufacturing such gloves in the United Kingdom is 43s. 3d.; in other words, the wholesale price of this article will be just about double for the United Kingdom product compared with the imported Hong Kong product.
There follows from this one important and regrettable result, that under the D Scheme of Purchase Tax the United Kingdom product will attract about 10s. 6d. tax per dozen, whereas the Hong Kong product will attract only a nominal tax of about 1d. per dozen.
I am suggesting to the House and to the Minister that this is an undesired and undesirable result, and I am asking my right hon. Friend tonight to make really strong and effective representations,

as a matter of urgency, to his right hon. Friend the Chancellor of the Exchequer. It is only fair to say that the National Association of Glove Manufacturers is appreciative of the consideration which they have received from the officials of the Customs and Excise. I only say that to give myself an opportunity of adding that the views which this Association and the industry put forward two years ago, which I had the opportunity of expressing in this House on the Committee stage of the Finance Bill, are still fully maintained and that there has been no departure whatever from the views then expressed.
I ask my right hon. Friend to give us an undertaking tonight to call the attention of the Government to this obviously unintended result of the D Scheme, namely, that the home product is seriously penalised so far as Purchase Tax is concerned as opposed to the cheap goods imported from overseas, even though it be from the Empire.
I sum up by saying that this industry with which we are concerned is hundreds of years old. It is composed largely of very small concerns. Its main strength lies in the skill and craftsmanship of those engaged in it. At this moment the threat of this new competition is already making itself felt, and there are many manufacturers who are making stock to avoid putting off labour.
I very much hope the Minister will not reply—I am sure he will not—by saying that this is an old problem; because it is not. The Hong Kong glove industry is a very new industry and is a new and serious threat to an old-established home industry. Unlike the home industry, its competitive power is not shackled by high costs and penal taxation. I ask my right hon. Friend to bear in mind most carefully that this is not an industry which comes whining for help. It has nothing to fear from incapacity, but it is worried, not without reason, by the high costs in the economy in which it is compelled to exist and the high taxation it is compelled to carry.
I believe it is the duty of my right hon. Friend and the Government to give this matter, which is a very widespread problem and, I freely admit, not an easy one,


most urgent, careful and deep consideration. I hope that he will discharge that duty in the same way as I have tried to discharge my duty by raising the matter in the House tonight.

10.16 p.m.

Mr. Barnett Janner: I want to add a word or two to the appeal which has been made by the hon. Member for Yeovil (Mr. Peyton) in a reasonable and modest way. The Minister will have realised by this time that this is a very serious and important problem in my constituency. I do not say that it affects extremely large numbers of people, but it does affect a substantial number who have been engaged in the trade of making knitted gloves—experienced workers and manufacturers who have been and are producing an excellent article at a reasonable price.
Leicester constituents tell me that it is quite clear that if there is no restriction whatever on these imports the British knitted glove industry will cease to exist. Some have given me official figures and quote from the Colonial Report, Hong Kong, for 1952, where it is stated that the average daily rates paid to workers, female and male, semi-skilled and unskilled, are equal to 6s. 3d. per day. The equivalent costs in this country for female labour are 4s. per hour. The same Report admits that there is a wide range of Chinese firms where wages are considerably lower. From reports which have been received in this country, there is no doubt that the actual rates per hour in Hong Kong amount to no more than 8d., or even less as a day shift consists of nine or more hours. It is quite impossible for British firms to compete against that type of cheap labour.
I ask the Minister not to regard the figures given in answer to Questions in the House with regard to unemployment as a satisfactory answer to the position. In my constituency manufacturers have had to put some men on short time, but in addition they are retaining skilled workers in the hope that something will be done to improve the situation so that they can give them continued employment. I hope that the Minister will listen to the appeal which has been made.

10.18 p.m.

Brigadier Christopher Peto: I wish to support my hon. Friend the Member for Yeovil (Mr. Peyton), as I have supported him on

other occasions on the same subject. We believe, and I am sure the Minister believes, that the first duty of the Government is to home production, secondly, to the Dominion and Commonwealth and, thirdly, to foreign countries. We want him to protect our own home industries above all others.

10.19 p.m.

The Minister of State, Board of Trade (Mr. Heathcoat Amory): I am grateful to my hon. Friend the Member for Yeovil (Mr. Peyton) for the chance of saying a few words on this matter, although I am afraid they will be very few because of the shortness of time. It is a matter on which there is some misunderstanding. My hon. Friend started by referring to gloves which may come in under the Japanese Trade Agreement. I agree with him that the quantity is likely to be very small.
My hon. Friend asked for two assurances. With regard to the first assurance for which he asked, I can promise that the quota will be carefully supervised. I am quite unable to give him the second assurance for which he asked, because I cannot say what arrangements may be entered into in future trade agreements between Japan and this country. We must confine ourselves now to the present trade agreement.
During 1953 substantial quantities of knitted gloves came into this country from Hong Kong. The figure the hon. Member quoted for woollen gloves is the same as the figure which I have, 154,058 dozen. The number of fabric gloves coming in was small, only 9,445 dozen.

Mr. Peyton: May I repeat that this is a new industry which is now developing?

Mr. Amory: I entirely agree that it is an industry which has been going for about the last year and a half, and it is quite possible that it may develop further.
I agree that gloves coming from Hong Kong are substantially cheaper than those made in this country. While rates of pay in Hong Kong are undoubtedly low compared with rates of pay in this country, they are relatively high according to Far Eastern standards. The United Kingdom knitted glove industry is a very small section of the hosiery industry. I believe that the hosiery and knitwear industry employs about 130,000 people and the knitted glove section accounts for


about 5,000 of them. The known unemployment at present is, to all intents and purposes, nil. I have been able to hear of only 13 workers registered as unemployed, though I agree we do not know the number of unregistered out-workers.
We have no evidence whatever that any gloves other than those manufactured in Hong Kong have qualified for Imperial Preference. We know of no gloves imported into Hong Kong from Japan or China and subsequently sent to this country and which have qualified for Imperial Preference. If any hon. Member has evidence that that is so, I shall be delighted to receive it.

Mr. Janner: If the Minister will look into the figures of production capacity in Hong Kong and compare that with the number of gloves they are sending, not only to England but elsewhere, I think that he will have a different opinion.

Mr. Amory: I have done that. It is easy to reconcile the number of knitted gloves. I mentioned 154,000, and 83,000 made of other materials were imported, which is a total of 237,000. I believe the production of the knitted glove industry in Hong Kong is at present about 350,000 pairs a year, so that there is not the smallest difficulty in finding that that quantity was made in Hong Kong.
The qualifications for Imperial Preference, the conditions which must be satisfied, are that the gloves must have been consigned from the Commonwealth and shown to have been grown, produced or manufactured in the Commonwealth. In the case of knitted gloves, the Board of Trade Regulations lay down that 25 per cent. of the value of the gloves must be represented as costs incurred in the Commonwealth. My hon. Friend asked if I thought that was sufficient, and from the advice I have received I think it is. Again, if he or any other hon. Member has any evidence which would lead me to change my mind, I should like to have it. All the evidence I have at present leads me to believe that 25 per cent. seems to be a sufficient proportion to lead to the result which we desire, which is that only gloves genuinely manufactured in the Commonwealth shall qualify.
As my right hon. Friend the President of the Board of Trade said this afternoon in answer to a Question, knitted woollen

gloves made in Japan and subsequently embellished or embroidered in Hong Kong would not qualify for the Preference, and the Customs, I am informed, exercise a very strict control over that. Therefore, the position, according to my information and the best advice that I have been able to get, is that gloves coming in under Imperial Preference are limited to those which are genuinely manufactured in Hong Kong.
I have said that a substantial number of gloves have been imported from Hong Kong, and I quite understand the concern of manufacturers. The question is whether any action can or ought to be taken to put this right. We cannot—I want to make this absolutely clear—justify the use of quotas to prevent the import of gloves from the sterling Commonwealth. Quotas can only be justified when they are required to safeguard our balance of payments, and there are no balance of payments difficulties whatever with Hong Kong.
Also, any change in the policy of according free entry to Commonwealth products as far as tariffs are concerned would have the most far-reaching implications. We must also remember the needs of Hong Kong with her greatly increased population and the disruption of much of her traditional trade with the mainland.
Therefore, I am afraid that I can hold out no hope whatever of any action that we can take in either of those two ways. I have mentioned that I cannot at present see any evidence to make me think that the 25 per cent. proportion that we take is not adequate.
I agree that Purchase Tax is considerably higher on the United Kingdom products. I have seen some figures submitted by the National Hosiery Manufacturers' Federation in relation to woollen gloves. The difference in the retail price was 3s. 9d. Of this extra amount, the manufacturing cost accounted for 1s. 8d., the wholesaler's margin was 4d., Purchase Tax was only 6d., and the retailer's margin was Is. 2d. The point is that even if the Purchase Tax limit were doubled—it would have to be doubled to eliminate Purchase Tax—it would make a difference of little more than 6d., perhaps 9d., out of the 3s. 9d., which would still leave the United Kingdom gloves at 3s. dearer.
I am sure that my right hon. Friend will be glad to consider any representations which my hon. Friend has to make, provided that they are accompanied by relevant information. I am always willing to consider representations, too, if they concern our responsibilities. To keep this matter in perspective, we must remember what I have mentioned about the very full employment at present. Fortunately, there is no unemployment that we know of in the industry. Long may that continue.
I hope that the very few remarks which I have been able to make in the short time left to me have gone some way anyhow to alleviate the anxieties which I know that my hon. Friend the Member for Yeovil and the hon. Member for Leicester, North-West (Mr. Janner) feel.

Question put, and agreed to.

Adjourned accordingly at Twenty-nine Minutes past Ten o'clock.